Cirrus Networks has taken aim at Webcentral over how it pays its executives and its allegations about its ability to straighten out its finances, in response to renewed pressure from the web hosting company to convince shareholders to vote in favor of its public offering. ‘purchase last week.
In a letter to shareholders, Cirrus Chairman Andrew Milner compared the compensation of Webcentral CEO Joe Demase to that of former Cirrus CEO Matt Sullivan, as well as the net debt of the two companies.
Webcentral said last week that it had a plan to “restore” Cirrus to “an appropriate level of profitability,” to which Milner responded by comparing the performance of the two companies over the past five years. During the period, Milner said Cirrus saw increased revenue growth and margins, compared to what the board considers Webcentral’s “consistent operational underperformance”, with declining revenue. and for not having been able to report profitability during the last three reference periods.
Milner also targeted Webcentral’s current net debt of $ 39.2 million, compared to Cirrus having no debt on its balance sheet and $ 7.7 million in cash.
To be more specific, Webcentral recently released audited FY21 results for the 18 months to June 30, 2021, which included an after-tax net loss of $ 63.1 million, or (46.81) cents per share, and a negative net guarantee of tangible assets of (50.61) cents. per share, ”Milner said.
Milner cited compensation reports from Webcentral and sister company 5G Networks, which said chief executive Joe Demase was paid around $ 1.8 million in FY21, of which $ 500,000 was paid by Webcentral and the rest by 5G Networks. He said that was more than double the “already exorbitant” compensation of $ 699,562 Demase received in FY20 from 5GN.
By comparison, Milner said former Cirrus chief executive Matt Sullivan received “a relatively small amount” of $ 322,017 in FY21, up from $ 300,784 in FY20. Sullivan left Cirrus last week for personal reasons, with interim CEO and COO Chris McLaughlin named as his permanent replacement.
Speaking to shareholders, Milner said, “Simply put, Webcentral’s financial performance and fundraising capacity is significantly lower than Cirrus. Your administrators struggle to understand how Webcentral sees itself as having a “proven track record of success” and how, with $ 39.2 million in net debt, the company could implement a “turnaround plan” for Cirrus then. that she was clearly unable to do so. the same for himself.
“Your administrators believe that Webcentral is no better positioned than the management team and the board of directors of Cirrus to significantly increase the profitability of the company. “
Milner added that the board views Webcentral’s behavior during the take-over bid process as “selfish, potentially deceptive and highlights the board’s concerns that Webcentral wants to take control without offering shareholders an appropriate control premium.
Cirrus continues to encourage shareholders to take no action until the shareholder vote scheduled for October 15, 2021.