An activist investment trust, once championed by Neil Woodford, is attempting to oust the chairman of a London-listed intellectual property company that was also backed by the fallen stockpicker.
Crystal Amber has requesitioned a general meeting calling for the removal of Allied Minds’ non-executive chair, Harry Rein, who has overseen a collapse in share price, while racking up “egregious” costs.
The Aim-listed trust, which is fronted by investment adviser Richard Bernstein (pictured), currently owns an 18.4% stake in Allied Minds. As part of its future strategy, which was recently approved at a general meeting, it is seeking to realise several of its major holdings, including Allied Minds.
Before the collapse of his fund empire, Woodford was a significant investor in both companies, owning a 17% position in Crystal Amber and 27.4% stake in Allied Minds. Crystal Amber, which takes stakes in undervalued small and mid-cap UK companies, also once owned the Woodford Patient Capital Trust.
Crystal Amber slams bloated costs and communication mishaps
Crystal Amber said a shareholder vote is required to bring about “a more suitable board structure” to get the IP group back on track and deliver the best returns for shareholders.
This is not the first time the activist investor has wielded its influence over the US-based tech incubator.
In November 2019, it called a shareholder vote to remove most of Allied Minds’ board, including co-CEOs Joseph Pignato and Michael Turner, off the back of ballooning head office costs, which saw management rake in bonuses as the company’s share price tanked. Turner relinquished his post months later, leaving Pignato as sole CEO. In January 2021, he also resigned from the company.
Without a chief executive, Allied Minds has been run by its three non-executive directors, but Crystal Amber claims Rein is the “key decision maker”.
Since he became chair in March 2020, the activist investor points out Allied Minds’ shares have plunged over 40% while the Nasdaq US Small Cap Index has risen 85%.
Under the current management, the company has developed “an egregious total expense ratio” of 5.2% per annum, adjusted for cash.
Crystal Amber has also accused the board of governance failings and major investor communication errors, including the publication of a “rogue” press release by one of its portfolio companies Federated Wireless, which stated that revenue growth was four times higher than expected. The company is also chaired by Rein.
Allied Minds responds
In response, the board of Allied Minds has launched a strategic review of the business but maintains the company is managed in “as cost-efficient a manner as possible”.
In a letter to shareholders, signed by Rein, Allied Minds urged shareholders to vote against Crystal Amber’s proposals to remove the chair.
On Wednesday, the company flagged independent proxy advisor ISS has also recommended shareholders vote against Crystal Amber.
The board of Allied Minds will convene the requisitioned general meeting on 5 April.