Concerned Shareholders of Cano Health Condemn the Board’s Egregious Conduct and Unwillingness to Accept a Resounding Rebuke at the 2023 Annual Meeting
17 Julho 2023 - 10:00AM
Business Wire
Group Holding ~35% Stake Issues Letter to
Cano’s Stockholders Regarding the Current Board’s Latest Failures
and the Importance of Continuing to Provide Feedback to the Failed
Directors
Questions the Current Board’s Ability to
Maintain Credibility as it Continues Ignoring a Critical Mass of
Stockholders
Reaffirms Support for Interim Chief
Executive Officer Mark Kent and Urges the Company to Pursue the
Immediate Sale of Non-Core Assets to Pay Down Debt and Refocus
Cano’s Strategy
Reiterates Commitment to Sustaining a
Campaign for Change, With the Goal of Ensuring Mr. Kent and
Management are Supported by a Properly Reconstituted Board
Elliot Cooperstone, Lewis Gold and Barry Sternlicht
(collectively with our affiliates, the “Group” or “we”) today
issued the below letter to Cano Health, Inc. (“Cano” or the
“Company”) (NYSE: CANO) stockholders. As a reminder, the Group’s
advocacy this past spring resulted in overwhelming WITHHOLD votes against Dr. Alan Muney and Kim
Rivera, who were the two members of the Board of Directors (the
“Board”) standing for re-election at the Annual Meeting of
Stockholders (the “Annual Meeting”) held on June 15, 2023.
***
Fellow Stockholders,
The three of us hold an approximately 35% equity stake in Cano,
making our Group the largest stockholder of the Company. We are
gratified that the initial phase of our campaign for change at Cano
resulted in the current Board being harshly rebuked by more than
82% of voting stockholders at the recent Annual Meeting. We are
equally pleased that our efforts helped lead to Dr. Marlow
Hernandez resigning as Chief Executive Officer following a troubled
public market tenure that was defined by abysmal capital
allocation, egregious disclosure lapses and related-party
transactions, persistent strategic missteps and substantial value
destruction. This has paved the way for a new Chief Executive
Officer, which we suggested during our service as directors, to
start bringing sorely needed operational acumen, proper ethics and
integrity to Cano.
We encourage Mark Kent, Cano’s interim Chief Executive Officer,
and his team to focus on achieving efficiencies, eliminating
excesses and executing a more focused strategy. If supported by a
reconstituted Board and no longer shackled to Dr. Hernandez’s
self-serving agenda, we are confident they can unlock Cano’s
significant earnings power and enhance value for all of us. This
brings us to the purpose of today’s letter: making sure you are aware of key facts and in a position
to continue to share your views with what remains an entrenched
Board.
Since the Annual Meeting, the following has occurred:
- The Board has disregarded the unambiguous results of the Annual
Meeting, where more than 82% of the votes cast WITHHELD support for Dr. Alan Muney and Kim
Rivera. We question how Dr. Muney, Chair of the Compensation
Committee, and Ms. Rivera, Chair of the Nominating & Corporate
Governance Committee, can possibly continue to retain their
leadership positions as Committee Chairs, much less their board
seats. Their unwillingness to step down from the Board reflects a
clear disregard for good corporate governance and the will of the
stockholders they are supposed to represent. This seems to align
with the Board’s general unwillingness to adopt the widely utilized
“Majority Voting Standard,” which the Council of Institutional
Investors estimates has been adopted by the vast majority of
S&P 500 companies and a majority of Russell 3000
companies.
- The Board has elected to keep Dr. Marlow Hernandez as a
director, despite him being a failed leader who should have been
required to step off following his recent resignation as an
executive. Dr. Hernandez’s employment agreement plainly stated that
“the Executive shall be deemed to have resigned from all officer
and board member positions that the Executive holds with the
Company or any of its respective subsidiaries and affiliates upon
the termination of the Executive’s employment for any reason.” Mr.
Kent needs to be given the opportunity to refresh the leadership
team and put Cano on the path to value creation, which we believe
he cannot do with Dr. Hernandez’s continued involvement in any
capacity at the Company. Beyond this, we question how Dr. Hernandez
can continue to even serve as a fiduciary when he is in debt to
executives of Cano (stemming from a series of loans and pledges of
stock that were only disclosed at our prior behest) and still
entangled with other related-party transactions.
- The Board continues to keep in place Sol Trujillo as Chairman
and Angel Morales as Chair of the Audit Committee. This is a slap
in the face to stockholders considering that they both acted as
blind allies of Dr. Hernandez, having stood by him as approximately
90% of Cano’s equity market value was destroyed. We hold Messrs.
Trujillo and Morales directly accountable for Cano’s shoddy
governance, back-to-back delayed 10-Ks and participation in the
egregious $57.8 million transaction with MSP Recovery, Inc.
(“MSP”). We firmly believe Messrs. Trujillo and Morales knew Cano
would be issued practically worthless MSP shares in exchange for
sold receivables, which was recently confirmed in MSP’s July 7th
8-K filing.1 In our view, this speaks to their motivations in not
bringing such a significant transaction to their fellow directors
for approval in the first place.
- The Board remains comfortable with sweetheart severance deals
for executives, as evidenced by what we deem to be a golden
parachute for Dr. Hernandez. It is completely irresponsible for
these directors, who claim to be prioritizing stockholders’
interests, to be authorizing sweetheart deals for failed leaders
from scarce stockholder capital.
- The Board continues to keep in place Frederick S. Green, who up
until last year worked at Cano’s outside law firm, Weil, Gotshal
& Manges LLP (“Weil”), as the Company’s Interim Chief Legal
Officer. In our view, the Company should not continue providing
exorbitant monthly equity awards to Mr. Green. How can the Board
claim to be putting stockholders first when it is relying on an
in-house attorney that appears incentivized to maintain the
value-destructive status quo?
- Directors Muney and Rivera as well as Jacqueline Guichelaar
remain unwilling to buy any stock of the Company on the open
market, thereby perpetuating their misalignment with stockholders.
We do not believe a Board comprised of such misaligned and
uncommitted independent members should continue to deny a critical
mass of stockholders a say in the Company’s future.
- The Board has refused to include Guy P. Sansone and Joseph
Berardo, Jr., who we put forth as director candidates, in its
purported refreshment process. This is the case despite Messrs.
Sansone and Berardo having valuable experience with
liquidity-constrained companies in the healthcare services
industry. We seriously question how these directors can be so
arrogant as to try to pick their own colleagues and replacements
above the clear objections of major stockholders.
How can a group of
misaligned directors who oversaw the destruction of significant
value, who stood by anti-stockholder actions and inaction, who
ignored the will of more than 82% of the voting stockholders at the
recent Annual Meeting, who endorsed countless related-party
transactions, who presided over dubious material transactions, and
who continue to stand behind Dr. Hernandez and a business strategy that has clearly failed
have any credibility with Cano stockholders?
We believe the facts demonstrate that this Board has acted
irresponsibly and opted to remain oblivious to the deteriorating
performance of the Company. It seems that we and our fellow
stockholders need to once again communicate our collective disdain
for the status quo and desire for an alternative strategy. As far
as we are concerned, the following steps are essential:
- The Board needs to collaborate with us, Cano’s largest
stockholder, on a refreshment process that results in the
departures of Dr. Hernandez, Mr. Trujillo, Dr. Muney, Ms. Rivera
and Mr. Morales. We remind stockholders that Dr. Hernandez and Mr.
Morales are “lame ducks” given they are up for election in 2024.
Should they not step down prior to the opening of the Company’s
nominating window, we intend to instead nominate competent,
integrity-rich and experienced directors to replace them then.
- The Board, once properly reconstituted, needs to elect a
Chairman and Committee Chairs that have the confidence of
stockholders.
- The Board, once properly reconstituted, needs to publicly
commit to supporting Mr. Kent and his team in accelerating the
divesting of Cano’s non-core assets in order to support debt
reduction and a more focused strategy that targets the high-growth
Florida market.
- The Board, once properly reconstituted, needs to revise and
actively enforce Cano’s policies to limit related-party
transactions, insider dealings and excessive stock pledging on the
part of insiders.
- The Board’s members need to show alignment with stockholders by
purchasing stock on the open market during future open
windows.
You can contact Cano and request that your own feedback be
shared with the full Board by emailing the purportedly independent
Chairman at sol@tgrpllc.com or
investors@canohealth.com. While the Board does not
appear to be addressing stockholder feedback right now, we believe
it is important for the directors to continue hearing from all of
us.
In closing, rest assured that our Group’s campaign for change is
continuing vigorously. We have the conviction, resources and
resolve to hold this seemingly incompetent, misguided and corrupt
Board accountable – whether it is via an election contest, through
legal channels or in the court of public opinion.
Sincerely,
Elliot Cooperstone
Lewis Gold
Barry Sternlicht
1 Form 8-K, MSP Recovery, Inc., July 7, 2023 (link here).
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version on businesswire.com: https://www.businesswire.com/news/home/20230717630956/en/
Longacre Square Partners Charlotte Kiaie / Joe Germani, (646)
277-8813 ckiaie@longacresquare.com /
jgermani@longacresquare.com
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