Activist Farpoint Capital Just Sent This Absolutely Scathing Letter to Carl Icahn

Cadus, Farpoint Capital: In a new activist stake just filed, the Texas-based Farpoint Capital disclosed a 5.2% stake in Cadus Corporation (OTCBB:KDUS). The firm also elected to send a letter to Carl Icahn, who has been Cadus’ controlling shareholder for 18 years.

In the letter, Farpoint writers to Icahn, “It appears to us that you have relegated the company to the status of an unwanted orphan in a coma who receives no visitors,” adding, “This is not the kind of performance that investors have come to expect from Carl C. Icahn. Perhaps as a twitter devotee you should share it with your followers.”

Here’s the letter in all its glory.

As mentioned in the letter, Icahn has been a controlling shareholder in the biological database provider and drug discovery company, Cadus, since the mid-nineties. The stock’s performance year-to-date has underwhelmed, and is up just 8.5% (less than many other micro-cap peers). It’s clear that Farpoint either wants Icahn to put more effort into shareholder value creation here, or it would like him to sell his shares. The firm points to these missteps in particular:

1. From 2003 to the present the share price of Cadus (KDUS) has fluctuated between $1.03 and $1.97 a share. At the current price of $1.52 a share, shareholders have seen no gain on their investment after 10 years. Adjusted for inflation, they are net losers.

2. Book value on December 31, 2003 of $2.04 a share has declined to $1.72 a share on June 30, 2013. It continues to erode at about $0.01 a share every quarter.

3. Working capital on December 31, 2003 was $26,000,000. As of June 30, 2013 it was $22,000,000.

4. Tax net operating loss carry forwards have declined due to expirations from $28,800,000 as of December 31, 2003 to $18,900,000 on December 31, 2012.

5. No year since 2003 has shown a profit.

Disclosure: none

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