Stadium Capital Management withdrew its nomination at Sleep Number Corporation (SNBR)
Key Summary: Stadium Capital Management, holding 8.5% as of August 2023, expressed concerns over the company's long-term underperformance and the need for shareholder representation on the Board to improve governance and operations. By September, the firm criticized the Board for poor shareholder returns, capital allocation, and management oversight, requesting a meeting to discuss changes. Following a cooperating agreement in November 2023, the company added two new directors to its Board. Despite recent changes, Stadium Capital, now holding 11%, remains concerned about performance and plans to engage further on the need for additional reforms. On December 2, 2024, Stadium Capital Management nominated four candidates for election to the Board at the 2025 Annual Meeting. On March 13, 2025, the company and Stadium Capital Management entered into an agreement. As per the agreement, Stadium Capital withdrew its notice to nominate candidates for the 2025 Annual Meeting
Market Cap: $164 million| Sleep Number Corporation, together with its subsidiaries, offers sleep solutions and services in the United States.
- On August 25, 2023, Stadium Capital Management (8.5%) stated that it is concerned with the company’s long-term underperformance and believe shareholder representation on the Board is needed to drive improvements to the governance, capital allocation and operations. Stadium Capital stated that it is engaging in discussions with the Board and management regarding the composition of the Board and opportunities to enhance shareholder value. Source
- On September 13, 2023, Stadium Capital Management (9%) issued a letter and press release to the Board requesting a meeting with the independent directors to discuss the urgent need for shareholder-driven Board change. In the letter, Stadium Capital asserted that the Board has presided over abysmal shareholder returns, egregious capital allocation, poor corporate governance practices and questionable compensation decisions. Stadium Capital also expressed its views that the Board’s ineffective oversight has enabled management to let costs run out-of-control in pursuit of its wellness technology strategy. It has also expressed disappointment with the Board’s rejection of a good faith offer to collaborate on director refreshment, including adding its representative to the board.
Valuation insight
"Sleep Number spends 2x on R&D relative to Tempur Sealy even though Tempur Sealy generates, by our estimates, roughly 4x the retail sales of Sleep Number. Yet, based on our research, if Sleep Number spent proportionally the same amount on R&D as Tempur Sealy does, Sleep Number’s 2023 expected EPS would double."
- On November 7, 2023, Stadium Capital Management entered into a cooperating agreement with the company and pursuant to it, the company agreed to add Stephen Macadam and Hilary Schneider (the “New Directors”) to its Board. Source
- On October 30, 2024, the company announced Board and corporate governance changes.
- On November 4, 2024, Stadium Capital Management (11%) expressed concerns about the company's long-term performance despite recent leadership and governance changes. The firm intends to engage with the company and other stakeholders to evaluate the need for further changes. Source
- On November 25, 2024, Stadium Capital Management issued a press release and open letter to the shareholders. In the November 25th Letter, Stadium Capital expressed their views regarding the company’s need for a reconstituted Board and independent CEO search process. Stadium Capital also called on the company to collaborate with them to add new directors to the Board, appoint an Executive Chairman and ensure a wholly independent CEO search process to identify the company’s next leader. Stadium Capital concluded the Letter by making clear that they intend to nominate several exceptionally qualified directors for election at the 2025 AGM if the Board remains unwilling to engage constructively with them on changes they believe are necessary to unlock value at the company.
- On December 2, 2024, Stadium Capital Management nominated Kevin Baker, Patrick A. Hopf, Jeffrey T. Jackson, and Jessica M. Prager for election to the Board at the 2025 Annual Meeting. Stadium Capital also issued a press release supporting the Nominees, emphasizing their experience in capital allocation, product innovation, and turnarounds. Stadium Capital urged the company to collaborate on Board refreshment and an independent CEO search, but stated it would leave the decision to shareholders if the Board does not cooperate. Source
- On December 19, 2024, Stadium Capital issued an open letter to the shareholders outlining a plan to improve governance, strengthen leadership, and reset the CEO search process.
- On March 13, 2025, the company and Stadium Capital Management entered into an agreement. As per the agreement, Stadium Capital withdrew its notice to nominate candidates for the 2025 Annual Meeting, and Michael J. Harrison, Shelly R. Ibach, and Barbara R. Matas will not seek re-election. The only nominees for election will be Linda Findley, Deborah L. Kilpatrick, and Hilary A. Schneider. Additionally, Stephen L. Gulis, Jr. and Brenda J. Lauderback will resign by 2026, and the Board size will be reduced over time. Stadium Capital agreed to vote in favor of the new nominees. Source
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