Cannell Capital questioned Lee Enterprises Incorporated (LEE) regarding corporate governance structures

Market Cap: $152 million | Lee Enterprises, Incorporated (LEE) provides local news, information, and advertising services in the United States.

Alden Global Capital, LLC, Strategic Investment Opportunities LLC, and MNG Enterprises

• On November 22, 2021, Alden Global Capital, LLC, together with MNG Enterprises and Strategic Investment Opportunities LLC (together 6.3%), delivered a Non-Binding Proposal to the board regarding a potential offer by Alden to acquire all outstanding shares of common stock at a price per share of $24.00 in cash. Source
•  On November 29, 2021, the shareholder group announced they had delivered a notice of nomination for three individuals to serve on the board. Source
• On December 9, 2021, the company issued a press release announcing that the board rejected the Alden Proposal.
• On December 15, 2021, MNG Enterprises filed a complaint regarding the company's rejection of its previously reported director nominees. Source
• On January 27, 2022, the shareholder group delivered a letter to the company withdrawing the nomination of Carlos Salas, one of its original board candidates, focusing its proxy contest efforts on replacing two of the company's director nominees, Ms. Junck and Mr. Moloney, both extremely long-tenured and re-nominated in apparent contravention of the company's director retirement policy.
• On January 28, 2022, MNG Enterprises delivered a letter requesting to inspect a complete list of the company's stockholders and certain other corporate records, as permitted by applicable state law (the "Stockholder List Demand Letter"). The purpose of the letter was to enable MNG Enterprises to communicate with stockholders in connection with its solicitation and other matters that may properly come before the annual meeting. Source
• On February 3, 2022, the shareholder group issued a statement regarding the company. Kindly click here to read the statement.
• On February 8, 2022, the shareholder group filed proxy materials seeking support for its nominees. Source
• On February 15, 2022, the company announced that the Delaware Chancery Court upheld the decision by Lee's Board of Directors to reject the director nomination notice submitted by Alden Global Capital, LLC.
• On February 15, 2022, Alden Global Capital issued a statement in response to the Delaware Chancery Court's decision to uphold Lee's invalidation of Alden's two highly qualified and fully independent director candidates. They announced that their affiliate would file preliminary proxy materials with the SEC for a "Vote No" campaign, seeking shareholder support to compel the resignations of Mary Junck and Herbert Moloney III. They also issued a presentation titled, "Independent and Experienced Leadership is Required to Create Stockholder Value at Lee Enterprises – VOTE AGAINST the election of Mary Junck and Herb Moloney."
• On February 16, 2022, the shareholder group sent a letter to the board discussing concerns about the current plurality voting standard for the election of directors at the annual meeting and expressing their view that the board was using this standard as a tool to entrench themselves and avoid accountability to stockholders.
• On February 22, 2022, the shareholder group filed proxy materials seeking support to vote WITHHOLD on the re-election of Mary E. Junck and Herbert W. Moloney III as directors they believed were most responsible for the company’s history of poor performance and governance. Additionally, Strategic Investment Opportunities LLC filed a complaint in the Delaware Court of Chancery regarding the company's determination that the election of directors at the annual meeting was "contested" and that a plurality voting standard applied. Source
• On March 2, 2022, the Communications Workers of America urged shareholders to vote FOR the three director nominees put forward by Lee Enterprises' Board on the WHITE proxy card and to REJECT Alden Global Capital’s “vote no” campaign on the BLUE proxy card. Source
• On March 10, 2022, the company announced that shareholders at the AGM overwhelmingly voted to re-elect Lee’s three director nominees.

Cannell Capital

• In 2019, Cannell Capital recommended shareholders vote AGAINST the election of incumbent directors. At the AGM held on February 20, 2019, all incumbent directors were re-elected to the board.
• On February 19, 2021, Cannell Capital (8.64%) stated they had a telephone call with Lee Enterprises Chairman Mary E. Junck to propose and request a reply regarding the addition of a new board member. Cannell Capital believes the company is undervalued and that appointing a new board member would help decrease the discount between LEE's market value and its estimated economic value. On February 26, 2021, Ms. Junck dismissed this recommendation and request. Cannell Capital expressed its belief that changes to the board would benefit all shareholders. Source
• On August 31, 2021, Cannell Capital (6.84%) sent a letter to the Chairwoman of the Board urging the addition of forward-thinking individuals to the board to accomplish its mission and increase shareholder value. The letter included a thesis valuing Lee's current shares at $205 each, assuming new stewardship, and a list of questions for Lee. Source
• On September 23, 2021, Cannell Capital increased its stake to 8.21%.
• On January 26, 2022, Cannell Capital decreased its stake to 7.24%.

Update:

• On April 11, 2022, Cannell Capital increased its stake to 9.3% and disclosed a list of questions regarding corporate governance structures.

Past

Praetorian Capital Management

• On December 8, 2021, Mr. Kupperman of Praetorian Capital Management (7.31%) submitted a letter to the board regarding Alden Global Capital's takeover proposal, stating that the proposed purchase price was insufficient and opportunistic, grossly undervaluing the business.

Valuation Insight I believe the shares are worth north of $100 today and could be worth a few hundred dollars each if the digital transformation continues at its current pace. The only reason the shares trade at their current level is that investors have not yet realized that while the traditional print newspaper business is slowly declining, the digital business is growing rapidly, becoming an increasingly substantial part of the total business. Based on Q3 2021 numbers, LEE's digital business revenue grew by 48.3% year-over-year, with digital subscriber count increasing by 50.5%. Currently, 33.4% of the company's revenue and almost half of its adjusted EBITDA come from the rapidly growing digital business. By 2023, I expect approximately half of revenue and two-thirds of adjusted EBITDA will come from the digital business.

LEE has generated trailing twelve-month (TTM) adjusted EBITDA of $116.2 million, despite the effects of COVID-19 on the local marketing business and before realizing the full synergies of the B.H. Media merger. I believe the company can achieve adjusted EBITDA north of $150 million in 2023. If LEE traded at 15 times enterprise value (EV) to adjusted EBITDA (adjusted for debt paydown), it would still trade at a discount to more dominant papers like the New York Times (NYT), which trades at approximately 20 times EV/EBITDA, yet it could trade for north of $300 per share.