Activist Engaged Pushes for Changes at Coupons.com-Owner Quotient

(Bloomberg) -- Activist investor Engaged Capital has built a position in Quotient Technology Inc., the owner of Coupons.com, and plans to push for changes at the company to improve its performance and its governance. 

Engaged, which owns a 6.5% stake in Quotient, said in a letter Wednesday to its board that it is concerned about the company’s share price and operations. 

Glenn Welling, Engaged’s founder, said in the letter that those concerns were heightened this month when Quotient reported its quarterly results, slashing its guidance and revealing that it had lost a key customer, Albertsons Cos.

Welling said he believes that there are several parties that would find its assets attractive if the company is unable to drive growth. 

“If the company remains oblivious to the issues in need of correction and continues to be managed for profitless growth, every director in this boardroom will be held accountable by stockholders,” Welling said in the letter. “It is not too late to change the company’s direction.”

Quotient has made meaningful changes over the last several quarters, making progress on scaling its platform and reducing low-margin business to set the company up for long-term growth, the company said in a statement. 

“We look forward to engaging with Engaged Capital to better understand their views as we continue to execute our strategy to drive shareholder value, as we do with all shareholders,” the company said.

Reduced Guidance

Steven Boal, Quotient’s founder, chairman and chief executive officer, said on a conference call this month that the weakness during the third quarter and the company’s reduced guidance were due to a pullback on national promotions related to out-of-stock products and supply chain pressures.

Welling said the miss is part of a broader trend that has seen Quotient reduce its guidance almost every quarter for the past four years. He said the company has lost credibility with investors as a result of its forecasts being “unreliable and untrustworthy.”

Quotient’s shares have fallen 53% since its initial public offering in 2014. Its shares rose as much at 3% Tuesday. They were trading at $7.58 apiece as of 9:35 a.m. in New York, up 1.3%, giving the company a market value of $717 million. 

Customers of Quotient, founded in 1998 and based in Salt Lake City, include Walmart Inc., Campbell Soup Co., Danone SA and General Mills Inc. 

Engaged, based in Newport Beach, California, has a history of agitating for changes at the companies it invests in. That has included pushing for new CEOs at some, such as Hain Celestial Group Inc., and the sale of others, as was the case at Del Frisco’s Restaurant Group Inc.

Governance, Board

Welling said he believes Quotient’s underperformance is tied to poor corporate governance and a series of measures that were unfriendly to shareholders. Those include a board in which only a few directors are elected each year, and a “manipulation” of the number of directors who will be elected this year.

Boal is scheduled to stand for re-election next year.

Welling criticized a so-called poison pill that the company adopted last week that acts as a deterrent for shareholders to own more than 4.9% of the company. Engaged and its affiliates plan to seek an exemption to allow them to own up to 9.9%, he said.

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