Fermi shareholder calls for sale after Rick Perry loses board vote
Fermi co-founder and largest shareholder Toby Neugebauer is calling for the company to be put up for sale after Rick Perry failed to win re-election to its board. Neugebauer says the vote, Fermi's falling stock price and opposition from Texas voters show that shareholders want a change in direction.
- Rick Perry received votes from 38.9% of Fermi's outstanding shares.
- Excluding Perry family holdings, 31.5% of remaining shares voted for him.
- Neugebauer says Fermi's stock has lost more than 80% of its value.
- He wants Fermi put up for sale while it closes a tenant deal.
- He says the company needs capital, construction expertise and a customer.
Perry received support from 38.9% of shares
In a statement issued through PR Newswire on November 6, Neugebauer said only 38.9% of Fermi's outstanding shares voted to re-elect Rick Perry, while more than 61% did not. After excluding the 68,842,821 shares the Perry family last reported owning, he said 31.5% of the remaining shares voted for Perry.
Neugebauer also said Perry ran behind the other director on the ballot on every measure. He attributed the result in part to a bylaw change approved by Fermi's board on August 11 without a shareholder vote. Under the revised rule, a director must win a majority of all outstanding shares, with each share not voted for the director treated as a vote against.
“I believe that rule was built to keep shareholders from replacing directors,” Neugebauer said in the statement. He added that, under the plurality rule the board removed, Perry would have been re-elected even if all of Neugebauer's family shares had opposed him.
Neugebauer points to a steep fall in Fermi's value
Neugebauer said he proposed a dual-track process on May 22 to sell or partner Fermi while continuing to evaluate its standalone plan. At that time, he said indicative enterprise valuations ranged from $10 billion to $20 billion and that several leading investment banks contacted Fermi but were rebuffed.
He said he suspended his proxy campaign on July 3 to give the board room to pursue that process. According to Neugebauer, Fermi's stock has since lost more than 80% of its value and the company's cost of capital has “exploded.” He said every share Fermi issues now raises about one-fifth of what it would have raised when he stepped back.
Neugebauer said a nine-minute scripted annual meeting did not give shareholders an adequate opportunity to ask questions. He also disputed Fermi's claim that he breached an agreement by declining to vote for Perry, citing questions about whether Caddis, Griffin Perry's company, still met the ownership requirement for a board nominee.
Call for a sale alongside a tenant agreement
Neugebauer urged Fermi to pursue a sale while it closes a tenant deal. He said the company needs a partner with a lower cost of capital, construction expertise and a customer, and warned that shareholders would not accept a recapitalization that wipes them out.
His statement also discussed negotiations involving Fermi's original Tenant 1, TensorWave and another company. Neugebauer said the former senior management team believed it was on track to close a larger lease with TensorWave by June 30, but that the board has not announced whether critical closing conditions, including secured financing, have been met.
“Fermi's problems are not with us,” Neugebauer said, adding that his family remains committed to fighting for shareholder rights in Texas. He also said discovery is underway in his lawsuit and encouraged the board to release its written communications with him.
The statement presents Neugebauer's interpretation of the shareholder vote, the company's market performance and its tenant negotiations. His proposed path would combine a potential transaction with efforts to secure a tenant, rather than relying solely on Fermi's standalone plan.
