Tuesday, August 6, 2019

Paging all HAUP Shareholders...

A year ago I wrote about HAUP breaking state law by refusing to show me, a shareholder, the company's financial statements.  Since then I have joined a group of shareholders to push for change.  We've sent the company multiple financial statement demand letters.  We've engaged a nano-cap activist who specializes in proxy battles.  We've talked with lawyers and are preparing ourselves for the next step.

This is an update and call to arms.  If you are a HAUP shareholder please send me an email: nonamestocksdan@gmail.com.  I want to know how many shares are held by people I know, how many votes might side with me.  No matter your position size please contact me.  Let's see how big we really are.

History:
Please read my first HAUP blog post if you don't know the story.  The quick version is they de-registered in 2014 and the stock has dropped to nothing.  I think it's likely worth many multiples of the current stock price, but I don't have current numbers to back that up.

Update:
The story is the same as when I wrote it up last year.  I wish I could give more of a company update but they don't communicate.  The company continues to put out new products.  The stock its at $0.0639 giving a market cap of $650k, slightly above the $0.05 it was when I first wrote it up.  The stock has been sideways for years


Activism:
Now to the drama.  As you know I sent HAUP a letter demanding access to financial statements because state law gives me that right.  The CFO refused and is breaking the law.  The Delaware Division of Corporations told me they can't help and please contact the Attorney General.  Surprise, surprise the Attorney General didn't respond to me.  The CEO doesn't respond.  The board of directors doesn't respond.  I'm sensing a pattern.

A month after my post I did a podcast with Eric Schleien who runs Granite State Capital Management.  One stock we discussed was HAUP and Eric actually travelled to see HAUP in person.  He talked with the CFO Jerry "state law breaker" Tucciarone in person.  See a description here.  Same thing happened to Eric as had happened to me... Jerry refused to give financials.

A number of people contacted me about HAUP and some of us formed a shareholder group in the fall of 2018.  After many texts and emails we settled on a strategy to send a group financial demand letter and go from there.  We controlled over 10% of the stock.

First one member sent a letter on his own from his value firm.  Similar to mine but more official and he got the same treatment...no response whatsoever.

Next we engaged a lawyer and paid for a letter to be sent.  See the appendix at the end of this post.  Again, no response.  The lawyer did talk to CFO Jerry "what is fiduciary duty" Tucciarone on the phone but it resulted in nothing.

One of the members had his own lawyer send a letter to HAUP.  Notarized and sent certified mail...and...nothing.  Lawyer said it was the first time anyone has just completely ignored one in his career.

Another member sent his own letter to HAUP.  He's sent many of these in the past to other companies and has never been ignored.  Well there's a first time for everything!  Surprise, HAUP has not responded.

For those keeping track at home that makes 5 financial demand letters we've sent.  Two from individual shareholders, one from a fund, and two from lawyers.  One of them noting 10% group ownership.  All of them pointing to state law.  Schleien has met the company in person and I've talked with them as have others.  Absolutely ridiculous we have to go through this just to see financials of the company we own.

They are daring us to take them to court.  Clearly they violate state law and don't care.  Can't claim ignorance anymore.

What's next might be a court battle.  No doubt we would win so the question is cost and reward.

Then there is the nano-cap activist.  We know a guy who specializes in this type of thing.  He wages proxy battles to install new leadership and force change.  Takes up cases he knows he can win.  Step one is an annual shareholder meeting.

Question for him is how many votes could we get and that's where you come in.  Are you a HAUP shareholder?  Let me know at nonamestocksdan@gmail.com

--Dan
disclosure: long HAUP


-----------------------------------------------------------------------------------------
Appendix: Our group letter to HAUP
-----------------------------------------------------------------------------------------


14 comments:

  1. I've done several microcap activist campaigns and I can tell you that you are going to have to sue them in Delaware court for books and records to get any disclosure from them. Don't waste your money on anything less like having lawyers send letters or talk to them. I'd ask for everything in the petition (financials, board meeting minutes, etc), a requirement to publicly disclose future financial statements, monetary damages and attorney fees etc. They won't provide you anything otherwise because they technically don't have to (i.e. no one is forcing them). They will argue to the judge that to publish financials they need to have the results audited which is an undue financial burden.

    I'd be worried that the board may have given itself and management a whole bunch of stock over the past five years. There's a reason they are hiding and it's not that they are doing it for the best of the shareholders. On the last proxy they asked for stockholder approval to issue preferred stock but it didn't pass. I'd bet that they were contemplating issuing it to themselves with super-voting rights or something along those lines. At least they are in Delaware and not Nevada.

    ReplyDelete
    Replies
    1. ^this is pretty awesome info, thank you. just a quick question, how bad is Nevada incorporation? i've heard it's a huge red flag but i haven't been able to dig up any substantive examples.

      Delete
    2. Thanks. We will see what happens. Shouldn't be this difficult. CFO has said share count is the same now as last time they filed with the SEC.

      Delete
    3. That's good to hear about the share count.

      Nevada is a huge red flag. The laws (and the judges) there are very pro-management and anti-shareholder. Whenever you see a company reincorporate to Nevada run from it because management is planning on screwing shareholders.

      Delete
    4. Are there any court precedents you could point to? Ideally, if it's super open-and-shut, it could be done with minimal legal expense.

      Delete
    5. Well I know FRTN shareholders took the company to court and won but I don't think this will be cheap for us. I'm sure there are other examples out there

      Delete
    6. Agree with this 100%. As my lawyer used to say "the only thing that shows you're serious is a lawsuit."

      Until a suit is filed you're just arguing, and they know they can stonewall you forever.

      Sue in state court as OP mentioned. Look at your local state as well, could do a cross suit with standing because you're a shareholder who lives in said state. Some states will reward damages to injured shareholders.

      Put the company on notice, tell them that books and records aren't the final. That once you have all of the requisite information you're going to investigate fiduciary duty, self-dealing and file suit for any faults.

      If your goal is to simply make money then file suit and when the company stonewalls tell them you'll sell your shares back for $.25 apiece and they can keep operating in the dark.

      Delete
    7. To the cost, if you're going to trial without a settlement and management digs in their heels it isn't that bad, maybe $100k-150k in total.

      Delete
  2. It's absolutely absurd that business owners have to do this sort of stuff just to see the books for their own company. How the hell does filing a form 15 exempt you from adhering to State corporate law? I wish I owned some shares so I could give you some support Dan, good luck with the legal recourse!

    ReplyDelete
    Replies
    1. It's absurd for sure. They are just betting no one will spend the time and money to push hard enough

      Delete
  3. I’d be willing to sell my stock for 1.00$
    I don’t think the company has too many shares out. I think 1$ would cost them 2-2.5 mm— a fair medium so they can run the company the way they want. I think it’s better to buy stock than push money on a lawyer

    ReplyDelete
    Replies
    1. Karl if you have HAUP stock and read my blog why have you not emailed me?

      Please email me: nonamestocksdan@gmail.com

      Delete
  4. Is IB no longer allowing trading in this name for everyone else?

    ReplyDelete