By Jarrett Banks
Leaf Group Ltd. holders who own more than 40 percent of the company’s issued and outstanding shares issued a letter saying the board should fire Chief Executive Officer Sean Moriarty. This follows the resignation of Chairman James R. Quandt on Sept. 21.
In a statement Friday, the group, which includes Osmium Partners, PEAK6 Investments and Oak Management Corp., said the departures of five of its nine directors since April reflect the shrinking support for Mr. Moriarty and his standalone plan for the company.
The news comes after a recent CorpGov report indicating the company’s management, notably Mr. Moriarty, failed to make a good faith effort to conduct a strategic review process earlier this year. The article, citing sources close to the matter, said the company made it nearly impossible for at least one bidder to conduct proper diligence or arrange financing for an asset purchase.
“It is hard to believe that this tide of departures is due to anything other than a desire not to be the last director left stranded on the Leaf Group island with CEO Sean Moriarty,” the investor group said in a statement. “The four remaining directors have stubbornly protected Mr. Moriarty despite his long track record of destroying value (more than $1 billion at companies he has led) and overwhelming dissatisfaction among shareholders.”
Leaf Group is a diversified consumer internet company that focuses on lifestyle categories, including fitness and wellness and art and design.
The investor group also warned the remaining four directors, three of whom they say have long-standing personal and professional ties to Moriarty, against filling in the board vacancies without consulting the shareholders, saying that any attempt to do so would be seen as illegitimate.
The list of signatories includes, according to an amended 13-D filed with the SEC: Osmium Partners LLC, PEAK6 Investments LLC, Boyle Capital Opportunity Fund, LP, Oak Management Corp., Generation Capital Partners II LP, Generation Partners II LLC, Spectrum Equity Investors V, LP and Spectrum V Investment Managers’ Fund, LP.