{ "docId": "019dd923-622b-71dc-a6da-1761adfa8c34", "docSlug": "c29a35b308ab", "documentTitle": "Box, Inc. (BOX)", "authorId": "03_Starboard_Value", "authorName": "Jeffrey C. Smith", "documentKindSlug": "regulatory-filing", "documentKindLabel": "Regulatory filing", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2021-05-20 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 32, "pageCount": 72, "prevPage": 31, "nextPage": 33, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 4, "notes": "This is a text-heavy page from a regulatory filing (likely an activist investor presentation or letter). It uses a narrative structure to build a case of breach of fiduciary duty.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622b-71dc-a6da-1761adfa8c34/32", "deckHref": "/decks/019dd923-622b-71dc-a6da-1761adfa8c34", "deckJsonHref": "/decks/019dd923-622b-71dc-a6da-1761adfa8c34.json", "deckAnchorHref": "/decks/019dd923-622b-71dc-a6da-1761adfa8c34#slide-32", "components": [ { "bbox": null, "kind": "callout", "text": "Starboard believes these seemingly self-serving actions demonstrate a complete disregard for proper corporate governance and fiscal discipline by members of management and the Board and suggest that these transactions were not entered into with the best interest of the common stockholders in mind.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-2b62-723f-b67b-d50cdb6928d9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.16, "w": 0.78, "x": 0.11, "y": 0.63 }, "kind": "paragraph", "text": "Starboard was therefore not surprised to learn that others share similar concerns with the Series A Financing. On May 12, 2021, the Complaint was filed in Delaware Chancery Court against the Board by the Building Trades Pension Fund of Western Pennsylvania. The Complaint alleged the Board breached its fiduciary duties and sought an injunction blocking enforcement of the voting agreement. One day later, the Company back-tracked on the voting rights restrictions - while issuing a press release denying any wrongdoing - and reactively eliminated the KKR Investors' voting obligations. Unfortunately for the Board, this reactionary maneuver does nothing more than underscore the Board's defensive-minded actions and acknowledgment of wrongdoing, while further highlighting the true intent of the Series A Financing - to entrench the Board at all costs.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1cd58917-d59d-4969-9b10-861548f2fea2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.78, "x": 0.11, "y": 0.09 }, "kind": "paragraph", "text": "cash on its balance sheet, available capacity on its revolving credit facility, access to debt markets on an as-needed basis, and was generating positive free cash flow every quarter. The Company stated that the purpose of such financing was for acquisitions, but since that time has only completed two small acquisitions for an aggregate cash purchase price of $60 million.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "40f10495-4583-4c9d-a173-2855b2df702e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.78, "x": 0.11, "y": 0.25 }, "kind": "paragraph", "text": "Following the $345 million convertible debt issuance and the subsequent acquisitions, but prior to the Series A Financing, the Company had approximately $535 million of cash on its balance sheet and also publicly disclosed that it expected to generate approximately $170 million of free cash flow in fiscal year 2022.3 Starboard believes this should have provided plenty of available liquidity for both acquisitions and buybacks; however, despite this significant and growing cash position, management and the Board chose to execute the Series A Financing, which now leaves the Company with an estimated cash balance of greater than $1 billion, representing more than 25% of the Company's current market capitalization. Apparently recognizing that there could be no valid business rationale for maintaining such a high cash balance, the Company announced its intent to use the proceeds from the Series A Financing to conduct the Dutch Self-Tender.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8c8c371a-93a5-42ca-bb7c-2705d8230ec1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.16, "w": 0.78, "x": 0.11, "y": 0.8 }, "kind": "paragraph", "text": "The timing of the Series A Financing's closing only raises further questions about the motives behind the Board's decision to extend the nomination deadline for the 2021 Annual Meeting, which resulted in an automatic extension of the Standstill Period under the Settlement Agreement. Given the sequence of events described above, together with the absence of a business rationale for the Series A Financing, Starboard suspects that the Board extended the nomination deadline knowing it would also extend the Standstill Period solely to give management and the Board additional time and cover under which to finalize the Series A Financing and lock up the vote while Starboard was restricted from releasing public letters or announcing director nominations. Such activities represent a clear manipulation of the corporate machinery and demonstrate the defensive motive of the Series A Financing.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9718db3d-9c89-43bb-b016-c64e18fb82ac", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.78, "x": 0.11, "y": 0.51 }, "kind": "paragraph", "text": "It also does not appear that the Company engaged in a competitive process in connection with the Series A Financing. Starboard believes it is quite transparent that management and the Board's goal in completing the Series A Financing was simply to substitute common stockholders who have the ability to vote as they wish with supportive preferred investors who, until recently, were legally bound to vote in accordance with the Board's recommendations.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c11fc7cc-8a91-4daf-a698-6304287e2433", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.15, "x": 0.11, "y": 0.96 }, "kind": "source-note", "text": "3 Company filings.", "attrs": { "numbered": true }, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "080dafa3-e62c-4f73-99d4-dbbf5f77b746", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "d1af0e8b-d1ee-4b49-ac04-7e45c94b71a8", "evidence": "The text systematically builds a case of breach of fiduciary duty and manipulation of corporate machinery.", "confidence": 0.8 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }