LOS ANGELES, June 27, 2011 /PRNewswire/ -- Baker Street
Capital, L.P. announced today that it has issued an open letter to
all stockholders of Tix Corporation (OTCQX: TIXC). Baker
Street is the largest stockholder of Tix, with current ownership of
approximately 22% of the shares outstanding.
The full text of the letter follows:
June 27, 2011
Fellow Tix Stockholders:
IT'S TIME TO CREATE VALUE AT TIX CORPORATION
THE STATUS QUO IS NOT ACCEPTABLE
Baker Street Capital, L.P. ("Baker Street") intends to nominate
a slate of highly-qualified director nominees for election to the
Board of Directors of Tix Corporation ("Tix" or the "Company") at
the 2011 Annual Meeting of Stockholders of the Company. As
Tix's largest stockholder, owning approximately 22% of the
outstanding voting stock, we have a vested interest in ensuring
that the Tix Board and management are acting responsibly as
stewards of our investment. We are dedicated to ensuring that
the significant value of Tix is realized for the benefit of
all stockholders.
We have taken a long-term approach with respect to our
investment. For quite some time it has been our view that Tix
is substantially undervalued. Although we were initially pleased
with certain actions taken by the Company and its financial
performance, recent actions taken by the Tix Board have raised
serious concerns on our part. Our concerns were
heightened when we learned in March
2011 that senior management may have been exploring a buyout
of Tix without conducting a formal process to assure that
stockholders received the highest possible value for their shares.
After we attempted to engage in discussions with the Tix
Board and management regarding an alternative transaction that we
believed would yield full value to the stockholders, the Company
proceeded to put in place a series of stockholder-unfriendly
anti-takeover devices.
WE OFFERED TO BUY THE COMPANY AT A 56.7% PREMIUM, WHICH TIX
REJECTED WITHOUT PROPOSING ALTERNATIVES TO MAXIMIZE STOCKHOLDER
VALUE
On March 30, 2011, we submitted a
letter to the independent directors of Tix expressing our deep
concern that senior management may have been exploring an
acquisition of the Company at a small premium to the then depressed
value of the shares, thereby denying stockholders the opportunity
to realize the full value of their investment. We offered,
subject to certain conditions, to acquire all of the shares of
common stock of the Company not already owned by us for a minimum
of $2.10 per share in cash. The
purchase price represented a premium of 56.7% over the Company's
closing price of $1.34 as of
March 30, 2011. We
subsequently met with the Tix Special Committee's financial
advisors and expressed our significant financial commitment and
ability to take the steps necessary to consummate the transaction.
We made it clear publicly and privately that we were willing
to participate in a full and fair process to fully explore
strategic alternatives that would deliver maximum value to all
stockholders.
Unfortunately, we never heard back from Tix or its advisors.
On May 10, 2011, we learned
from a press release issued by Tix that the Company had rejected
our proposal. The press release did not announce any
strategic alternatives or value enhancing plans. These
events reinforced our concerns that the Tix Board and management
appeared to prioritize their own interests over those of the
stockholders.
WE BELIEVE THE TIX BOARD HAS IMPLEMENTED ONEROUS
ANTI-TAKEOVER PROVISIONS
The Tix Board's decisions over the past 90 days add to our
concern that it is not acting in the best interests of
stockholders. Consider the following:
Adoption of Poison Pill - On April
1, 2011, the Company announced that it had adopted a
stockholder rights plan, or "poison pill". We believe the
poison pill will force any would-be acquirers to negotiate any bids
for Tix with management, instead of making their offers directly to
the stockholders of the Company. The poison pill appears to
protect the incumbent directors and management at the expense of
stockholders.
Unilateral Amendment of Bylaws - On May 10, 2011, the Tix Board adopted amendments to
the Company's bylaws making it more difficult for stockholders to
nominate directors. Specifically, the bylaw amendments
require stockholders seeking to nominate directors to submit a
notice to the Company that includes, among other things, all
information regarding the nominating stockholder and its nominees
that would be required to be disclosed in a proxy statement filed
with the SEC under the proxy rules applicable to SEC reporting
companies. Tix is no longer an SEC reporting company.
As a result, the amount of disclosure nominating stockholders
are now required to submit regarding their nominees far exceeds the
amount of disclosure Tix is required to provide to stockholders
regarding its incumbent directors in the election of directors.
In our opinion, the bylaw amendments impose undue burdens on
stockholders who wish to challenge incumbent directors.
WE ARE EXTREMELY CONCERNED THAT THE TIX BOARD HAS PERMITTED
TRANSACTIONS INTENDED TO GIVE IT VOTING POWER OVER LARGE BLOCKS OF
STOCK
In December 2010, Tix entered
into what we believe are a series of unorthodox agreements with
managers of a subsidiary, TIX Productions, Inc. ("TPI").
Through these transactions, large blocks of TIX common stock
were acquired by Tix and then placed in the control of undisclosed
persons, subject to undisclosed terms, to be voted on corporate
matters. Specifically, Tix entered into agreements (a) to
purchase 2,333,333 shares of common stock from members of TPI's
management in exchange for Tix's interest in TPI; and (b) to
purchase approximately another 3.9 million shares of common stock
from members of TPI's management in exchange for approximately
$4.8 million, payable in installments
over two years. The agreements provide that the 6,266,524
shares involved (or about 20% of the outstanding shares) would be
placed in escrow as collateral for Tix's ongoing payment
obligations. We are extremely concerned that Tix will
assert that the Tix Board or CEO has the right to vote this
significant block of shares in the election of directors at the
next annual meeting of stockholders. These shares have
been booked by Tix in its own financial statements as treasury
stock and should be treated as such. Any attempt by the Tix
Board or CEO to gain an unfair advantage in corporate voting
matters should not be tolerated by stockholders.
WE WERE FORCED TO FILE A LAWSUIT AGAINST TIX FOR ITS FAILURE
TO COMPLY WITH OUR BOOKS AND RECORDS REQUEST UNDER DELAWARE
LAW
On May 16, 2011, we sent demand
letters to Tix requesting a stockholders list along with related
stockholder information and books and records relating to the TPI
sale agreements discussed above. We requested the
stockholders list and related stockholder information in order to
allow us to communicate with other stockholders in connection with
the election of our slate of nominees at the next annual meeting of
stockholders. We requested the records relating to the TPI
sale agreements in order to allow us to investigate what voting
rights, if any, attach to the shares currently being held in escrow
and whether these arrangements put in place by the Tix Board are
lawful.
Tix refused to comply with our request for the materials
concerning the TPI sale transactions. Instead we received
letters from one of the Company's law firms making absurd
accusations that we were going on a "fishing expedition" and that
we were using Delaware law to
"extract greenmail" from the Company. To set the record
straight, Baker Street has never sought to extract greenmail from
Tix or any other company. Accusing us of being greenmailers
defies logic under these circumstances, especially given the fact
that we have just recently made a proposal to acquire Tix for a
substantial premium and have openly urged Tix to create value for
all stockholders by, among other things, inviting the
Company to conduct a robust, full and fair sales process.
On June 20, 2011, we filed a
lawsuit in Delaware Chancery Court
in order to enforce our right to receive the information.
After withholding the stockholders list and related information
requested in our demand letter for over one month, Tix
hand-delivered these materials to us only hours after it was
informed that we had filed the lawsuit. Unfortunately, Tix
has yet to furnish the information we requested concerning the TPI
sale transactions. What is the Tix Board trying to hide?
It is extremely unfortunate that the Tix Board is inclined to
deploy stockholders' cash (and to force its largest stockholder to
deploy its cash) on litigation it could have easily avoided by
merely complying with our requests.
THE TIX BOARD HAS RECENTLY PERMITTED NEW TRANSACTIONS WE
BELIEVE WERE DESIGNED TO SECURE VOTING RIGHTS
Recently, the Tix Board negotiated new agreements that
involve the use of corporate resources to shift votes into the
hands of Tix employees, shortly after learning that we intend to
nominate directors for election at the next annual meeting.
On June 17, 2011, Tix announced
that certain of its employees purchased an aggregate of 1,215,367
shares from one or more stockholders for $2.00 per share (representing a 14% premium to
the then current market price) payable in installments over five
years. Tix has guaranteed the employees' obligations to pay
for the shares and will acquire the shares if they default.
Tix has also agreed to loan to the employees the funds
necessary to make each installment payment. The shares appear
to be held in escrow until the payment of the final installment of
the purchase price to the sellers although the employees have the
ability to vote all the escrowed shares.
Tix has publicly stated that these transactions serve several
important benefits, including strengthening employee relations.
Stockholders should not be fooled - we believe
these transactions were designed to place another large block of
voting securities in the hands of employees over which the Tix
Board may exert significant influence. These arrangements
are also fraught with corporate governance issues:
- Have the Tix employees involved in these purchases breached
their fiduciary duties by usurping what should have been a
corporate opportunity?
- Has the Tix Board breached its fiduciary duties by
misappropriating stockholders' cash to finance these purchases
solely for the purpose of placing a significant block of voting
securities in "friendly hands"?
- Why did the Tix Board favor the undisclosed selling
stockholders over all other stockholders by providing financing to
employees to buy stock from the sellers at a 14% premium to the
then current market price?
If Tix were still an SEC reporting company and the purchasers
were executive officers of the Company, we believe the Company's
loans to these officers in connection with the purchases would be
illegal under the Sarbanes-Oxley Act.
We have submitted to Tix a new demand letter under Delaware law requesting all books and records
relating to these agreements.
IT IS TIME FOR FRESH PERSPECTIVES IN THE TIX
BOARDROOM
REPLACE THE INCUMBENT DIRECTORS WITH INDIVIDUALS WHO WILL
FOCUS ON MAXIMIZING VALUE
We are challenging the incumbent directors at Tix's next annual
meeting of stockholders because we have concluded that a
reconstituted board is necessary. We are concerned that
the Tix Board has lost its way, as evidenced by the anti-takeover
provisions, escrow agreements and recent transactions that, in our
opinion, were put in place to silence stockholders. In
our view, the Tix Board must be comprised of directors whose
interests are aligned with those of all stockholders in order to
steer Tix back on the path of creating value for all stockholders.
If our director nominees are elected, their focus will be to
maximize stockholder value by immediately taking the following
actions:
- reducing any significant operating costs and expenses deemed to
be unnecessary, including the closure of Tix's California headquarters and consolidation of
all activities in the Las Vegas
offices.
- aggressively pursuing incremental revenue opportunities by
better monetizing Tix's significant customer traffic and
transaction volumes in Las
Vegas.
- exploring all strategic alternatives available to Tix,
including a full and fair process to sell the Company or other
means to return capital to stockholders.
If you share our dissatisfaction with the Tix Board, please
disregard any phone calls, proxy cards or other solicitation
materials you may have already received from Tix. We will
continue to update you on developments relating to the upcoming
election contest and invite you to contact us with any questions
you may have.
Sincerely,
Vadim Perelman
ABOUT BAKER STREET CAPITAL, L.P.
Baker Street Capital, L.P. is a value-focused investment fund
modeled after the partnerships managed by Warren Buffett from 1956 to 1969. Baker
Street Capital, L.P. is headquartered in Los Angeles, California.
CONTACT:
Vadim Perelman, 310-246-0345,
vadim@bakerstreetcapital.com
SOURCE Baker Street Capital, L.P.
