The Board and Management Clearly Have Lost the Confidence of Stockholders
Concerned that Allowing the Status Quo to Continue Will Result in More Insider Dealing and Destruction of Stockholder Value
Believes the Commencement of an Orderly Process to Sell Company Assets and Return Capital to Stockholders Represents the Best Path Forward to Preserve Stockholder Value
NEW YORK, June 21, 2022 (GLOBE NEWSWIRE) -- Shalom Auerbach, a significant stockholder of AIkido Pharma Inc. (NASDAQ: AIKI) beneficially owning approximately 3.8% of its common stock, today issued the following letter to stockholders of AIkido Pharma Inc.:
June 21, 2022
Dear Fellow Stockholders:
I am a significant stockholder of AIkido Pharma Inc. (NASDAQ: AIKI) (“AIKI” or the “Company”), beneficially owning approximately 3.8% of the Company’s outstanding common stock. Earlier this month on June 7, 2022, I sent a public letter to the Company’s board of directors (the “Board”) laying out my concerns about the Company’s abysmal stock performance, poor corporate governance and lack of accountability to stockholders. I also asked that the Board and management either redirect the Company towards setting out a clear business plan to create stockholder value while firmly establishing accountability to investors, or to return capital to stockholders.
Since my last letter, numerous AIKI stockholders reached out to me expressing similar concerns about the Company, particularly the Company’s general lack of a clear direction for its business, illiquid investments in unrelated outside businesses, and relationships with firms linked to AIKI CEO Anthony Hayes and other directors. It has become clear to me that the Company trades well below the value of its assets because stockholders have completely lost faith in the ability of the Board and management to enhance stockholder value. And why shouldn’t they? There has been massive destruction of stockholder value (down 75% over the year prior to my first public letter),1 pathetic level of support for directors at the Company’s last annual meeting,2 and no adequate response by the Board. What did the Board do instead? It added as a new director the wife of another Board member, who works at her husband’s investment firm that the Company uses to “to strategically manage and build its investment processes,” the same firm that the Company’s CEO recently agreed to buy a stake in!3 Combined with the Company’s staggered Board and long-term 4.99% poison pill that the Board has not put up to a stockholder vote, it is difficult to imagine worse corporate governance than what stockholders are suffering at AIKI.
Before and after sending my prior letter, I attempted to privately engage with the Board and management on the need for significant change at the Company. Unfortunately, the Company’s current directors and management do not appear to be interested in true engagement on stockholders’ concerns.
I believe that the Board and management have shown a glaring disregard for the best interests of stockholders, and have not given any genuine indication that they intend to change course. I fully expect that, so long as the current directors and management remain in place, management will continue to spend stockholder money on risky and illiquid investments, far outside the Company’s purported core biotechnology business,4 and the Board and management will continue to pay themselves handsomely in cash at the expense of stockholders. The exclusively cash-based compensation of the Company’s executives and directors for 2021, and directors’ minimal stock ownership of less than 0.25% of the shares outstanding, show a clear misalignment with the best interest of stockholders.5
As a result, I believe that AIKI stockholders would be far better off if the Company stops its value-destroying actions, sells the Company’s assets and returns cash to stockholders. I strongly urge the Board and management to publicly commit to take the following actions:
- Commence an orderly process to sell the Company’s assets and distribute capital to stockholders;
- Stop spending stockholder money on outside investments and investment advisor fees; and
- Align director compensation with stockholder interests in seeing a return of capital, including by requiring all directors to accept at least half of their compensation in the form of Company stock.
I understand that investment markets are turbulent right now, and because of the poor decisions of AIKI management a significant chunk of the Company’s assets are stuck in investments that may not be saleable at a reasonable price at this time. I’m not proposing a “fire sale” of those assets – the Company needs to preserve value for stockholders. However, the Company can stop the bleeding and prepare for an orderly sale of those assets when market conditions permit.
The Company’s directors have fiduciary duties to stockholders, and I believe that allowing management to continue making risky investments well outside of the Company’s purported business area (individually or through advisors) is inconsistent with those duties. In my view, the Company’s current directors should be concerned about potential legal liability for allowing those investments to be made, and approving transactions with a firm that employs two board members and in which the CEO agreed to purchase an interest.
If the Board and management continue to show a disregard for stockholder interests and concerns, I believe that stockholders will need to take action immediately to prevent further destruction of stockholder value at AIKI. This could include seeking to act by written consent to amend the Company’s bylaws to eliminate the staggered Board, and then to remove and replace current directors with new directors who are not beholden to management and will truly look out for the best interests of all stockholders.
Sincerely,
Shalom Auerbach
Contact:
Sauerbach74@gmail.com
(516) 217-3721
_______________
1 Closing price on June 7, 2021 compared to June 6, 2022.
2 With 89,293,446 shares of common stock issued and outstanding, 3,825 shares of Series D convertible preferred stock issued and outstanding, 834 shares of Series D-1 Convertible preferred stock issued and outstanding, 11,000 shares of Series O Preferred Stock outstanding and 11,000 shares of Series P Preferred Stock outstanding and eligible to vote, Anthony Hayes received 12,213,453 votes “for” and 4,159,661 votes “withheld”, and Robert Dudley received 10,958,821 votes “for” and 5,414,293 votes “withheld”.
3 See AIKI Annual Report on Form 10-K for fiscal year ended December 31, 2021 filed with the SEC on March 28, 2022, and AIKI Current Report on Form 8-K filed with the SEC on June 10, 2022.
4 Note recent AIKI investments in an enterprise software company, an electric truck producer, a tele-health business, and a social networking company for cannabis enthusiasts.
5 See AIKI 2022 proxy statement. Director ownership reflects common stock ownership not including stock options.
