Pentwater Capital Management, a US investment management firm, has accused the US wireless carrier Leap Wireless of a “series of mistakes and missteps that have resulted in the destruction of shareholder value” in recent years.
Pentwater, which holds a…
Pentwater Capital Management, a US investment management firm, has accused the US wireless carrier Leap Wireless of a “series of mistakes and missteps that have resulted in the destruction of shareholder value” in recent years.
Pentwater, which holds a 5% stake in Leap, has also nominated three new board members to the company.
In a letter to the Leap board that was made public on Thursday, Pentwater said that it believed the share price of Leap was “significantly undervalued”.
It added that the nomination of three independent board directors would “better align the Board with the interests of Leap’s shareholders”.
One of the nominated directors is Pentwater’s CEO, Matthew Halbower. It did not name the other two nominees, but said that they were former CEOs from “multi-billion dollar telecommunications companies”.
Leap shares closed at US$13.70 on the Nasdaq yesterday, after rising from US$12 at the start of the week.
This is significantly lower than the share price high for the year, US$18.89 on 23 April. Before the Credit Crunch, its share price was far higher, hitting US$95.90 in July 2007.
Pentwater said that one mistake made by the Leap board was not to merge with US mobile operator MetroPCS in 2007.
It said: “Had Leap’s Board of Directors agreed to the combination [with MetroPCS] and had even half the synergies been realised, we believe that Leap’s stock would be trading 280% higher than its market value today rather than down more than 80% from the time of MetroPCS’s offer in 2007.”
Leap said that it respected the right of shareholders to nominate directors, but it “strongly disagreed” with Pentwater’s assertions.
It said that it had already appointed three independent board members in November 2009 “who brought significant additional experience and strong operating and strategic perspectives to the Board”.
These three independent board members were: John H. Chapple, the president of equity firm Hawkeye Investments and former CEO of Nextel Partners; Ronald J. Kramer, the CEO of holding company Griffon Corporation; William A. Roger, the president of equity firm Roger Capital Company and former CEO of VeriSign.
Leap also said that it took action to transform the company’s business model in August 2010, including the introduction of nationwide 3G data coverage.
It said that in Q4 2010, customer churn rates fell to their lowest level for ten years and ARPU had also improved “significantly”.
