Michael Torok of technology focused private equity firm JEC Capital Partners and Bart Kool of Ratio Capital Partners said in an open letter Thursday that the Internet content provider should pursue strategic alternatives. Together, the two investors hold 9.8% of Synacor's common stock.
"We are confident that Synacor will have serious interest from multiple parties at prices far in excess of the current share price," the duo wrote.
Shares of Buffalo, N.Y.-based Synacor are up 6% year to date and closed up more than 6% Thursday following the shareholders' letter.They described the board's "failure of leadership," pointing to a drop in Synacor's share price, revenue and cash balance. Share price performance has dropped over 50% since its stock market debut in 2012 and has "lagged every comparable peer, metric and index," they wrote. According to Torok and Kool, Synacor's revenue has steadily decreased from $122 million in 2012 to 2014 guidance of $100 million, as has its cash balance, which has dropped from $43 million in 2012 to $33 million at the end of the latest quarter. In its most recent first quarter report on May 13, Synacor said revenue declined 15% from the same period a year ago. Synacor has a market capitalization of about $73.2 million. Corporate communications have no clear strategy, the two added, arguing that the share price highlights "irresponsible cost expenditures and missed opportunities for growth." Chief Executive Officer Ronald Frankel announced in March that he would step down from his position and Synacor has been on the lookout for a new leader since then. Instead of searching for a new chief, Synacor needs to engage an investment banker to pursue a strategic review, the dissident investors said. Synacor officials did not return calls Thursday.