In a 13D filing, Jeffrey Smith’s Starboard Value disclosed a 6.1% stake in LSB Industries Inc. (NYSE:LXU), which contains 1.39 million shares. The position was reduced from 1.73 million shares reported in an earlier filing. Starboard holds an activist position in the company, has appointed representatives on the board, and has been trying to pursue the management to enhance shareholder value.
Starboard Value is a New York-based activist hedge fund co-founded by Jeffrey Smith and Mark Mitchell in 2002. The investment firm takes on a fundamental approach to investing and primarily focuses on small-cap publicly traded U.S. companies. Starboard Value has had great success in generating attractive returns on its investments and managed to earn money on 88% of its activist investments. The fund has generated an annualized return of 22% since its inception in 2002, greatly outperforming the S&P 500 thus far. Starboard has been very active lately, as it reshuffled several holdings this week. For instance, the hedge fund has gone activist on MedAssets Inc. (NASDAQ:MDAS) with a stake of 8.7% in the company, but also sold almost its entire stake in Unwired Planet Inc. (NASDAQ:UPIP) to MAST Capital Management. In the meantime, Starboard Value oversees an equity portfolio with a market value of $4.81 billion as of March 31.
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As stated earlier. Starboard Value has been involved in an activist campaign in LSB Industries for more than a year and in April entered into a settlement agreement with the company, under the terms of which LSB increased the size of its Board to 13 directors and appointed five new directors nominated by the investor. Moreover, in March, Starboard sent a letter to LSB Industries, in which it stated that the company is undervalued and requires changes in operations, strategic directions and management structure.
LSB Industries Inc. (NYSE:LXU) is a holding company that engages in manufacturing and marketing operations through its subsidiaries. Specifically, the company operations in two segments: Chemical Business and Climate Control Business. LSB’s chemical business manufactures and sells nitrogen-based chemical products for the agricultural, industrial, and mining markets. Whereas, the climate control business manufactures and sells a range of heating, ventilation and air conditioning (HVAC) products. The shares of LSB have dropped by nearly 27% year-to-date after plummeting by over 34% during the trading session on August 7 as the company published its financial results for the second quarter of this year.
A few law firms have just opened investigation claims of potential misrepresentations by LSB Industries and certain of its officers and directors, focusing on whether the company violated securities laws by delivering misleading information to the public. Last week, LSB posted its financial results for the second quarter of this year, missing the earnings estimate by $0.35. At the same time, the company announced that its board’s Strategic Committee had authored a report after evaluating the company’s business strategy, related party transactions and other corporate governance practices. The Chairman of the Strategic Committee, Lance Benham, asserted the following:
“We believe the actions taken by the Board will significantly improve the Company’s corporate governance structure, enhance the execution of the Company’s strategic growth initiatives and ultimately drive improved shareholder value.”
Moreover, the company posted net sales of $182.7 million for the second quarter of this year, down by 9.4% compared to the same quarter a year ago. Meanwhile, the net income came at $0.02 per diluted share, compared to $0.47 posted a year ago. Some officials at LSB Industries have claimed that the financial results of the company for this quarter were impacted by both internal and external factors, which suggests that the company has not been doing so well lately. The stock of LSB Industries dropped significantly on August 7, affected by earnings miss, but also by the launch of investigations.
Interestingly, Jeffrey Smith’s Starboard Value sold 335,000 shares on August 5 and August 6 prior to the release of earnings. Another shareholder of the company is Jeffrey Gendell’s Tontine Asset Management, which owns 723,053 shares as of the end of March.
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