- TIXC Stock Performance From 2008 to 2010: Down 78.8%
- Russell 2000 Index Total Return From 2008 to 2010: Up 6.7%
- TIXC Total Net Income/(Loss) From 2008 to 2010: ($38.2) million
- Mr. Francis' Total Compensation From 2008 to 2010: $3.0 million
NEW YORK, April 8, 2011 (GLOBE NEWSWIRE) -- Mr. Ephraim Fields of Echo Lake Capital today announced he had delivered a letter to the Board of Directors of Tix Corp. (OTCQX:TIXC). In the letter, Mr. Fields expressed his belief that it is in shareholders' best interests that the contract of the company's CEO not be renewed when it expires in 2012.
The full text of the letter follows:
April 8, 2011
Mr. Ephraim Fields
c/o Echo Lake Capital
265 East 66th Street
41st Floor
NY, NY 10065
(917) 620-8421
Tix Corp.
12711 Ventura Boulevard
Suite 340
Studio City, CA 91604
To The Board of Directors of Tix Corporation:
As one of the largest shareholders of Tix Corp. ("TIXC"), we are acutely aware of the dramatic and long-standing underperformance of the company's stock. We believe that much of this underperformance is directly attributable to the questionable business decisions made by Mr. Mitch Francis, the company's Chairman and CEO.
We are also disturbed by the large compensation Mr. Francis has received in recent years. His compensation is especially distasteful considering TIXC's stock price has performed so poorly on both a relative and absolute basis.
Below are two tables you may find enlightening. The first table shows the dramatic underperformance of TIXC's stock from 2008-2010. The second table shows Mr. Francis' compensation and TIXC's net income during the same time period.
| Comparison of Stock Returns | ||||
| 2008 to 2010 | 2010 | 2009 | 2008 | |
| Tix Corp. | (78.8)% | (28.7)% | (19.1)% | (63.2)% |
| Russell 2000 Index Total Return | 6.7% | 26.9% | 27.2% | (33.8)% |
| TIXC Over/(Under) Performance | (85.5)% | (55.6)% | (46.2)% | (29.5)% |
| Analysis of Compensation | ||||
| 2008 to 2010 | 2010 | 2009 | 2008 | |
| Mr. Francis' Compensation | $3.0 million | $1.9 million | $0.7 million | $0.4 million |
| TIXC Net Income/ (Loss) | $(38.2) million | $(3.0) million | $(0.5) million | $(34.7) million |
As the above tables illustrate, from 2008-2010, the Russell 2000 generated a total return of +6.7% but TIXC's stock price declined by 78.8% and the company lost over $38 million. However, during the same time period, Mr. Francis was rewarded with compensation totaling $3.0 million. We hope you agree that the performance of the company and its stock price has been unacceptable.
We understand that Mr. Francis' Employment Agreement expires in March 2012. We believe it is in shareholders' best interests that Mr. Francis not be rehired as CEO for the following reasons:
1) We believe Mr. Francis has failed to create shareholder value and has been responsible for actions that have lead to the destruction of significant shareholder value.
2) We do not believe Mr. Francis is critical to TIXC's operations. The company does not require such an expensive CEO (especially one with such a disappointing track record) considering the company has two, relatively simple, essentially self-sufficient operating businesses. Each of these businesses has its own, highly capable management team who do not require significant input from a CEO. We understand that TIXC requires a CEO, but do not believe Mr. Francis is a suitable one. We believe a better and less expensive CEO can easily be found.
3) We believe Mr. Francis has alienated many potential investors. If Mr. Francis were no longer CEO, we believe many investors would consider purchasing TIXC stock, which would thereby create shareholder value.
4) We believe Mr. Francis' compensation is excessive for a company as small as TIXC. TIXC could save significant money and create immediate and meaningful shareholder value by hiring a less expensive CEO. In 2010, TIXC had revenue of only $30.9 million and net income/(loss) of $(3.0) million, yet Mr. Francis received $1.9 million in compensation.
5) TIXC's largest business and its management team are located in Las Vegas. TIXC's other business and its management team are located in Ohio. Therefore, we question why Mr. Francis maintains his corporate office in California. We believe the company would be better served if the California office was closed and TIXC's CEO was located in Las Vegas. This would enable the CEO to more easily monitor the company's largest and most important business. In addition, this would allow TIXC to reduce its excessive corporate overhead (which was a staggering $4.0 million in 2010) through lower rent, travel and other expenses.
6) Mr. Francis's current contract contains what we believe is a generous change of control provision. We feel this provision is completely unnecessary since we do not believe Mr. Francis is critical to the company's operations. More importantly, we believe this provision has actually been a detriment to the creation of shareholder value. We believe there are parties who have considered making a buyout offer (at a premium) for TIXC, but have been reluctant to do so because of the incremental cost of the provision. However, recently Baker Street Capital announced an offer to purchase TIXC, and we believe many other parties would be interested in acquiring the company if given the opportunity to do so. Unfortunately for TIXC shareholders, the need to pay Mr. Francis' change of control provision reduces the amount any buyer would be willing to pay for each TIXC share. Thus, the provision would effectively serve as a transfer of wealth from all TIXC's shareholders to Mr. Francis. Finally, we wonder why Mr. Francis, with his disappointing track record and generous annual compensation, deserves a "golden parachute" provision in his contract.
We are bringing these points to your attention because Mr. Francis' employment contract expires soon and we strongly encourage you to think carefully before offering him another contract. We do not believe his performance to date merits a contract renewal and do not understand how you can justify rehiring him. We believe that if you asked TIXC's non-management shareholders, they too would vote to not have Mr. Francis' contract renewed. We also wonder if Mr. Francis had delivered TIXC-like results as the CEO at another public company, how many of these companies would chose to rehire him and for that matter, how many would have fired him a long time ago.
As we have mentioned in our previous letters, we have grave concerns about your ability to and interest in acting in the best interests of TIXC's shareholders. If you renew Mr. Francis' contract, that would further convince us (and probably other large shareholders) that you are not interested in fulfilling your fiduciary responsibility of acting in the best interests of TIXC's shareholders. As you evaluate this and other significant Board issues, we hope you consider the financial, legal and reputational risks you personally may face by taking actions that are not in the best interests of shareholders.
We have no other incentive or motivation besides wanting to ensure that TIXC is being run in the best interests of all shareholders... we wonder if you can say the same thing.
Sincerely,
Ephraim Fields