{ "docId": "019dd923-622b-71dc-a6da-134a217a6fb6", "docSlug": "743c10fcdd5f", "documentTitle": "Box, Inc. (BOX)", "authorId": "03_Starboard_Value", "authorName": "Peter A. Feld", "documentKindSlug": "shareholder-letter", "documentKindLabel": "Shareholder letter", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2021-05-03 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 2, "pageCount": 3, "prevPage": 1, "nextPage": 3, "slideType": "executive_summary", "function": "diagnose_problem", "density": "overcrowded", "nDataPoints": 3, "notes": "This is a page from a shareholder letter, likely from an activist investor (Starboard).", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622b-71dc-a6da-134a217a6fb6/2", "deckHref": "/decks/019dd923-622b-71dc-a6da-134a217a6fb6", "deckJsonHref": "/decks/019dd923-622b-71dc-a6da-134a217a6fb6.json", "deckAnchorHref": "/decks/019dd923-622b-71dc-a6da-134a217a6fb6#slide-2", "components": [ { "bbox": null, "kind": "callout", "text": "The only viable explanation for this financing is a shameless and utterly transparent attempt to \"buy the vote\" and shows complete disregard for proper corporate governance and fiscal discipline.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0f1d-76e6-8702-0933bbdb0d05", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.8, "x": 0.1, "y": 0.26 }, "kind": "paragraph", "text": "To make matters worse, Box has recently executed two financing transactions within four months, neither of which were necessary, as the Company already had $225 million of net cash prior to these financings and generates cash each quarter. The second financing was transparently done to insulate management and the Board ahead of a potential election contest with Starboard, by issuing a $500 million voting convertible preferred security, which represents more than 10% of shares outstanding and requires that the preferred vote on an as-converted basis in accordance with the Board's recommendations. The stated use of proceeds from this financing is solely to execute a $500 million share repurchase, which means the Company is issuing $500 million of convertible preferred equity in order to repurchase $500 million of common equity. The only viable explanation for this financing is a shameless and utterly transparent attempt to “buy the vote” and shows complete disregard for proper corporate governance and fiscal discipline.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "7f2d0fed-5cf5-48a6-a65f-118a1be89c02", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.8, "x": 0.1, "y": 0.68 }, "kind": "paragraph", "text": "We believe Box can and should be a vibrant company addressing unmet needs in a large and growing category of the enterprise software market with its cloud-native content management solution. We believe the issues at Box are largely company specific and self-inflicted. There is no good reason that Box should be unable to deliver improved growth and profitability, at least in-line with better performing software companies, which, in turn, would create significant shareholder value.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "adde96be-4501-4b2b-a73c-0c6c4b4837a2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.04, "w": 0.8, "x": 0.1, "y": 0.83 }, "kind": "paragraph", "text": "We look forward to sharing details on our nominees and further thoughts on the opportunities at Box with our fellow stockholders in the coming weeks and months. We believe Box has a bright future and, with proper governance and oversight, can achieve significantly improved results and", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ca9ac2b8-d6ae-453d-891b-c56ab38addd9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.8, "x": 0.1, "y": 0.1 }, "kind": "paragraph", "text": "where most companies saw lower operating expenses due to COVID-19 related benefits), Box has not been able to address any of the other issues we identified. These disappointing results have been delivered against a backdrop of extremely healthy trends in the software industry, with many cloud-native software companies experiencing rapid growth, significant margin expansion, and dramatic share price growth during this time. Despite this subpar performance, the Board has failed to take meaningful and decisive actions to change the trajectory of the Company, and the status quo largely remains.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "da39277d-f8fd-4a37-86ad-def2eb807237", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.8, "x": 0.1, "y": 0.77 }, "kind": "paragraph", "text": "As such, in accordance with the Company's governance deadlines and in order to preserve our rights as stockholders, we intend to deliver to Box a formal notice nominating highly qualified director candidates for election at the 2021 Annual Meeting of Stockholders ahead of the upcoming deadline.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fa601ecb-e1ef-4eb0-b876-5940b7bbaf95", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.8, "x": 0.1, "y": 0.52 }, "kind": "paragraph", "text": "These recent actions, coupled with the continued underperformance and lack of value creation at Box, lead us to believe that further changes are both warranted and needed on the Board in order to provide fresh perspectives, renewed accountability to stockholders, and importantly, the objectivity and perspective to make difficult decisions without the burden of attachment to the past. Despite our frustration and concern regarding the Company's poor results and the most recent financing transaction, we have continued to engage with the Board constructively and in good faith, in hopes of reaching an acceptable outcome so that we can work together to represent the best interests of all stockholders. However, to date, the Board has refused our attempts to work together, and we appear to be at an impasse.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fe5070f6-eb25-49a9-b56b-7db2a9a9949f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.2, "x": 0.1, "y": 0.89 }, "kind": "source-note", "text": "2 Source: Company filings.", "attrs": { "numbered": true }, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f418b622-fd55-494c-806c-5ce7ecbde589", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Audience Definition", "slug": "audience-definition", "agent": "Storyteller", "layer": "slide", "matchId": "daa8c45b-6153-46b5-b2b3-8fce124fdd1e", "evidence": "The slide is addressed to the Board of Directors, indicating that the audience is defined as the Board members.", "confidence": 0.7 }, { "name": "Executive summary", "slug": "executive-summary", "agent": null, "layer": "slide", "matchId": "804b94a8-de83-4d1c-a5ff-7785433647fb", "evidence": "This slide is titled 'Letter to the Board of Directors' and contains a lengthy text that summarizes the main points of the letter, which is typical of an executive summary.", "confidence": 0.9 } ], "frameworks": [], "arcBeats": [ { "to": 2, "from": 2, "beatId": "03ac744d-682a-46c8-897d-5a4ec1d0d8f4", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Problem & Complication", "beatSlug": "consultants-gambit-problem-complication", "evidence": "The letter to the Board of Directors implies that there is a problem or complication that needs to be addressed.", "position": 1, "confidence": 0.8, "parentBeatName": "Complication", "parentBeatSlug": "complication" } ], "loops": [ { "to": 3, "from": 1, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "a8172f2d-7598-4309-a683-bf289b70bd57", "evidence": "The letter implies that inaction will lead to negative consequences for stockholders.", "position": 0, "objective": "What are the consequences of not taking action?", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.6, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }