PHOENIX, May 8, 2023
/PRNewswire/ -- William Coulter and
Mark Tkach, who together hold
approximately 32.0% of the outstanding Class B shares of common
stock of RumbleOn, Inc. ("RumbleOn" or the "Company") (NASDAQ:
RMBL), today provided an update to fellow stockholders about their
efforts to enhance stockholder value at RumbleOn.
Below is the full text of the letter:
Dear Fellow RumbleOn Stockholders:
As you may know from our previous letter, over 32 years we built
a thriving retail business, RideNow Powersports ("RideNow"). We
sold RideNow in August 2021 to
RumbleOn, after RumbleOn and its Chairman/CEO, Marshall Chesrown, approached us to acquire our
business. The result of this transaction caused us to become
substantial RumbleOn stockholders, with combined holdings of over
5.2 million shares, or 32.0% of RumbleOn Class B shares, as of
April 17, 2023.
Over the past several quarters, like other long term RumbleOn
stockholders, we have become increasingly disappointed in the
Company's financial results and corresponding stock price
performance. We repeatedly expressed our concerns in private to the
Company's Board and CEO. Yet, their response was so inadequate that
we saw no other choice than to begin a public campaign to improve
the Company. It is important to note again that we are
entrepreneurs who made our careers building and operating
powersports dealerships. We accepted some of the consideration for
our business in stock, as we believed in the vision of a combined
RideNow / RumbleOn business. That vision has not yet come to
fruition, in significant part due to a lack of management execution
and inadequate Board oversight. A lack of independence in the
boardroom has been a significant contributor to these
problems.
Since initiating our campaign, we have been taking steps with
the goal of maximizing value for all stockholders. We have
evaluated what the existing management team has accomplished and
has not accomplished since acquiring RideNow and Freedom
Powersports. We have been in communication with other large
stockholders to listen to their perspectives and to consider their
ideas. We believe, when and if our nominees join the Board, they
will need to immediately improve the Company's strategy, its
execution, its bloated cost structure and to make changes to the
Board such that accountability and independence are front and
center.
Given the time and cost associated with a proxy contest, and the
Company's acknowledgment in the March 16,
2023 earnings release that its business was challenged and
it was a priority to improve its balance sheet, we have made good
faith efforts to negotiate with the Board and its advisors in hopes
of reaching a settlement. While we recognize that a settlement with
the Company may not be perfectly reflective of the proposed changes
that we publicly disclosed, we are willing to accept terms that
will enable us to act quickly and decisively.
More specifically, we made our initial settlement proposal to
the Company on March 3, 2023. We soon
disclosed that proposal publicly, so that all stockholders would be
aware of what we sought and how those changes would improve the
Company. Incredibly, the Company did not provide a formal response
to our proposal until April 10, 2023,
offering to appoint Mr. Coulter to the Board, and to replace
RumbleOn's COO, Peter Levy, on the
Board with an independent director chosen by the Board with Mr.
Coulter's consent, at the annual meeting. We declined that modest
counteroffer, as we know first-hand from our short tenure on the
Board that much more change is needed on the Board, particularly
given the Company's poor total shareholder return (TSR), weak
operational performance and poor corporate governance
practices.
Given the business challenges that the Company is confronting,
we have continued to negotiate with Company, despite the Company
frequently changing the party we have been asked to negotiate with
– first outside counsel, then a tenured Board member and then an
investment bank engaged by the Board, each of whom have told us
that they represent the Company for purposes of these discussions.
Interestingly, even though Director Shin
Lee chairs the Company's Nominating and Corporate Governance
Committee, we have not had any contact with her about the
possibility of new directors joining the Board.
We have had numerous settlement discussions, including the
exchange of proposal terms, which are discussed in more detail in
our updated preliminary proxy statement filed today with the
SEC. In one of the Board's offers, they proposed that Mr.
Levy be terminated immediately as COO without cause, and also that
Mr. Chesrown would begin a transition period before resigning as
CEO by no later than the end of this year. We declined that offer,
but we made a counter offer that we viewed as consistent with our
objective of immediate Board refreshment with a majority of
directors who are independent of the current Board and management
team.
The Company's most recent offer proposed leaving Michael Marchlik on the Board through the annual
meeting, along with Messrs. Westfall and Chesrown and Ms. Lee,
resulting in four incumbent directors and three new directors on
the Board for the next two months. We are unwilling to accept that
offer, as those four incumbents could delay badly needed changes at
the Company and could make agreements with existing management that
would be contrary to stockholders' best interests.
We have discussed in earlier communications with stockholders
the Company's lack of urgency in addressing the operational issues,
such as its rising SG&A/revenue ratio and swollen inventory
levels. Our negotiations with the Company have only added to our
concerns. For example, one of the Company's prior settlement
offers contemplated Mr. Chesrown moving immediately into a
transition period as CEO through no later than December 31, 2023 (a change we had not sought),
in exchange for his entire severance being paid at the inception of
the transition period, instead of over three years, as his
employment contract calls for. We calculate the cash
component of this proposal (which does not include the vesting of
Company stock) to be approximately $4.7
million, at a time when the Company is working with JP
Morgan to improve its balance sheet. That same proposal
called for the immediate termination of Mr. Levy without cause (and
though not explicitly stated in the proposal, we assume implicitly
called for Mr. Levy to receive his full severance benefits,
consisting of significant cash and stock components).
The excessive bonus compensation which the Board awarded to Mr.
Chesrown and Mr. Levy for 2022 heightens our concern about this
issue. Mr. Chesrown and Mr. Levy were eligible for annual cash
bonuses of up to 125% of their base salaries. At the conclusion of
last year, Mr. Chesrown received a cash bonus of $658,282, 94% of his base salary, while Mr. Levy
received a cash bonus of $554,845,
111% of his base salary.
In February 2023, Mr. Chesrown
received a restricted stock grant (RSUs) for 190,909 shares, and
Mr. Levy received RSUs for 136,364 shares. Together, these grants
equal 2.0% of the Company's currently outstanding shares. This
year's RSU grants to Mr. Chesrown and Mr. Levy were more than three
times the amounts granted to them in March
2022.
This compensation was granted after the price of RumbleOn Class
B shares fell 84.4% in 2022. The Company's reported 2022 adjusted
EBITDA of $120.1 million was well
below its guidance of "at least $145
million," which management reiterated to stockholders as
late as August 9, 2022. Thus, as a
reward for the Company's poor performance that harmed its
stockholders, RumbleOn's top two executives were rewarded with
large bonuses and far more shares than they received the previous
year.
Incredibly, the Company has not disclosed the metrics by which
its executives were measured or how these RSU grants and bonuses
were calculated. We look forward to reading about these metrics in
this year's proxy statement.
The Board has a track record of not just questionable
compensation decisions, but also of business and personal
relationships with Mr. Chesrown and the Company. Nearly every
incumbent "independent" director has business or personal ties to
Mr. Chesrown. This, coupled with the negative trajectory of the
Company since the RideNow and Freedom acquisitions and the
excessive 2022 bonuses, demonstrates the Board's inability, or
unwillingness, to hold management accountable.
More specifically, Mr. Marchlik holds the important role of
Chairman of the Audit Committee, which by rule must consist
entirely of independent directors. He is an executive at an
affiliate of B. Riley Financial, Inc. When RumbleOn acquired
RideNow, a B. Riley subsidiary was RumbleOn's financial advisor and
its investment banker, garnering $17.1
million in fees during 2021. We understand that B. Riley
maintained an investment banking relationship with the Company
after the acquisition of RideNow.
Adam Alexander chairs the
Compensation Committee, which by rule must also include only
independent directors. RumbleOn spent nearly $4 million in 2022 alone on inventory management
software and services provided by Bidpath Incorporated, a company
owned by Mr. Alexander.
Kevin Westfall worked with Mr.
Chesrown twice before joining the Board, at AutoNation in the late
1990s and at Vroom.com nearly a decade ago. We understand that the
two enjoy a friendship of over 25 years.
While Mr. Levy is not considered an "independent" director for
SEC and Nasdaq purposes, his seat on the Board contradicts today's
best practices of corporate governance, which call for only one
insider, typically the CEO, to be on a public company board. His
lack of experience at brick-and-mortar stores, and his lack of
prior experience in the powersports industry, has shown prominently
in the Company's operating results. We understand that he and Mr.
Chesrown also have a long friendship.
Once more, the current Board lacks the fundamental skills and
experience to properly oversee RumbleOn. For example, no incumbent
"independent" director has any executive experience at a retailer
of powersports or similar products. No independent director holds a
meaningful ownership position in RumbleOn. Moreover, no director
has previously ever served on a public company board, other than at
RumbleOn.
We are also concerned about the skills and experience of any new
director that the current Board, or its advisors, may recommend.
During settlement discussions, the Board has also identified for us
certain candidates they are considering appointing to the Board.
Due to a limited non-disclosure agreement that we entered into with
the Company in order to learn the identity of these candidates, we
are unable at this time to discuss these candidates' individual
qualifications publicly. We can say that we do not believe
any are as well qualified as our nominees to sit on this Board.
Our nominees are extremely well situated and motivated to
address the strategic and operational challenges confronted by
RumbleOn. They bring knowledge of the powersports industry,
successful C-level experience at a publicly traded retailer of
recreational vehicles, and extensive experience as a public company
director, often at companies dealing with meaningful debt loads.
They are truly independent. All of these candidates were first
identified for us by a third-party firm we retained to lead our
search and vet potential candidates. We have no prior
relationships with any of them. Through this process, we are
convinced they are well qualified to lead the Company forward.
In closing, we are disappointed that we cannot bring news that
we have reached a settlement with the Company that can bring along
the change we are seeking more swiftly. However, it is important
that any settlement allow the reconstituted Board to promptly put
into effect the substantial changes that RumbleOn needs to
stabilize the Company, execute on the strategy that began with the
acquisition of RideNow and maximize value for all stockholders. If
such a settlement cannot be reached, we will seek the changes that
we previously disclosed at RumbleOn's annual meeting on
Friday, July 14, 2023.
Sincerely,
William Coulter
Mark Tkach
Contact information:
Bruce Goldfarb/Pat McHugh/Lisa
Patel
Okapi Partners LLC
212-297-0720
Info@okapipartners.com
William Coulter and Mark Tkach, together with the other participants
named herein (collectively, the "Participants"), have filed a
preliminary proxy statement and an accompanying WHITE universal
proxy card with the Securities and Exchange Commission
(the "SEC") with respect to the election of directors of
RumbleOn, Inc., a Nevada
corporation (the "Company"), and certain proposals for the
Company's 2023 annual meeting of stockholders (the "Annual
Meeting").
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
THE PARTICIPANTS MAY BE DEEMED TO BE PARTICIPANTS IN THE
SOLICITATION OF PROXIES WITH RESPECT TO THE ANNUAL MEETING. THE
PARTICIPANTS STRONGLY ADVISE ALL STOCKHOLDERS OF THE COMPANY TO
READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS RELATED TO THE
ANNUAL MEETING AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO
CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN
ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE
COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON
REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE
PARTICIPANTS' PROXY SOLICITOR.
The participants in the proxy solicitation are William Coulter, Mark
Tkach, WJC Properties, L.L.C., WRC- 2009, L.L.C., The WRC-98
Trust, The WRC 2021 Irrevocable Trust, Ride Now Management, LLLP,
Kyle Beaird, Melvin Flanigan and Steven Pully.
Information regarding the persons who may, under the rules of
the SEC, be deemed participants in the solicitation of
proxies in connection with the election of directors of the
Company and certain proposals, including a description of their
direct or indirect interests, by security holdings or otherwise,
will be set forth in the proxy statement and other proxy materials
as they are filed with the SEC.
As of the date hereof, the participants in the proxy
solicitation beneficially own in the aggregate 5,242,433 shares of
Class B Common Stock, par value $0.001 per share, of the Company ("Class B Common
Stock"). As of the date hereof, William
Coulter beneficially owns 2,621,405 shares of Class B Common
Stock, which includes 593,472 shares directly owned by The WRC 2021
Irrevocable Trust and 30,377 shares directly owned by WJC
Properties, L.L.C. WRC- 2009, L.L.C. is the controlling member of
WJC Properties, L.L.C., and The WRC-98 Trust is the sole member of
WRC- 2009, L.L.C., and accordingly WRC- 2009, L.L.C. and The WRC-98
Trust may be deemed to beneficially own the shares directly owned
by WJC Properties, L.L.C. Mr. Coulter serves as Manager or Trustee
for each of these entities. As of the date hereof, Mark Tkach beneficially owns 2,621,028 shares of
Class B Common Stock, and the remainder of the Participants do not
beneficially own any shares of Class B Common Stock.
View original
content:https://www.prnewswire.com/news-releases/william-coulter-and-mark-tkach-provide-update-to-fellow-stockholders-about-efforts-to-enhance-stockholder-value-at-rumbleon-301818104.html
SOURCE William Coulter and
Mark Tkach