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RESEARCH
NOTES

Ned Sherwood Sent A Letter To The Board Of Directors Of Barnwell Industries Inc

Dear Barnwell Industries Shareholders:


In a remarkable development, yesterday, BRN announced a shareholder rights plan. Make no mistake, while they tell you the purpose is to protect you, the shareholders, from me — primarily to stop me from buying more shares — its only purpose is to entrench the current, ineffective management team. The Directors that voted in favor of this measure must believe that they must protect the shareholders from actions that I might take given poison pills are generally implemented when management fears that new ownership may harm shareholder value, or might curb excess compensation to themselves as incumbent management. Over my forty year private equity career, I generated a positive 40% annual net return for my investors. As my prior filing shows, Barnwell management has only generated returns for themselves, not for minority equity holders. The stock is down over 40% since my initial stake in 2012. This is just the latest attempt by the Kinzler/Grossman family to keep the “gravy train” of company cash flow heading into their pockets. They want to stop me from buying more shares, yet they even use the company’s pension plan to buy shares (413,000 shares as of September 30, 2024) to attempt to bolster their position and to further entrench and enrich themselves.


Notwithstanding the Kinzler/Grossman (and I believe Horowitz) actions, many of the other shareholders (like me) are not happy. As of this morning, other BRN shareholders totaling approximately 10% have emailed their support of my efforts to dumpkinzler@gmail.com or otherwise contacted me with their support. If necessary, I am willing to engage an independent third-party to corroborate the support. Therefore, as of now, I have support of at least 40% of BRN’s shares. The other shareholders are not part of a group with me and they could sell or change their views, but given the wanton disregard for shareholder interests in company funds by the current board, in my opinion, I believe support for my efforts will grow even further. In fact, given that a substantial portion of BRN shareholders often have not voted at past annual meetings, I believe my position, with support of at least 40% of the vote, would likely be enough to elect slate I propose.


In order to enact this shareholder rights plan, Messrs. Kinzler, Grossman and Horowitz have engaged Ken’s brother’s legal firm, Skadden Arps, to “protect” the shareholders. BRN currently has a total market capitalization of approximately $18 million. Skadden Arps is reputed to be one of the most expensive law firms in the nation. As a 30% shareholder, I certainly don’t approve of spending Company funds with a firm of this caliber and expense and I don’t believe many of the non-Kinzler/Grossman shareholders do as well. Although I can’t be certain, I also don’t believe all five of BRN Directors have approved the use of Skadden Arps. The use of Skadden is just one example of Kinzler’s, Grossman’s and Horowitz’s blatant disregard for the well-being of other shareholders.


In my last letter, I documented the egregious aggregate compensation, which totaled more than $10.3 million, taken by Kinzler and Grossman (not counting legal fees paid to Ken Grossman’s brother’s firm) and contrasted these cash flows versus the 40% plus decline in BRN’s stock price over the same time period. In addition, Ken Grossman in 2023 received annual compensation of $183,374 as a Director versus the compensation of Craig Hopkins, BRN’s CEO, of $198,776.


Something seems very wrong about the board governance at BRN. As a 30% shareholder (and BRN’s largest single shareholder), all this imprudent value-destroying spending impacts me more than anyone else, and I am not happy about it. It is my opinion that, if the Kinzler/Grossman family shareholders want to oppose me, they should do it with their personal funds — not company money (30% of which I view as mine). I am initially using my personal money to try to effect change — why don’t they? In fact, I propose that both sides use personal money to fight and the winner get reimbursed while the loser pays personally.


Directors are bound by fiduciary duties, like their “Duty of Care” and “Duty of Loyalty,” to act on behalf of the company and all shareholders. Hiring one of the most expensive law firms in the world to draft and enact an entrenching and enriching “poison pill” shareholder rights plan does not demonstrate these fiduciaries acting as appropriate stewards of Company funds (funds which I consider the property of myself and the other shareholders). They must be held to account for this conduct, whether at the ballot box or otherwise.


Please keep emailing your support for my position to dumpkinzler@gmail.com. Obviously given the BRN board action, my shareholdings will remain fixed at 30% but getting support of more than 50% will assure a victory!


Sincerely,

/s/ Ned L. Sherwood

Ned L. Sherwood


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