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Share Name | Share Symbol | Market | Type |
---|---|---|---|
AMMO Inc | NASDAQ:POWW | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 2.52 | 1.82 | 2.90 | 0 | 09:00:00 |
Delivers Overview of New Strategy for Leveraging AMMO’s Existing Assets and Evolving the Company into a Diversified, Growing and Profitable Ecommerce Powerhouse
Highlights Long-Term Opportunity to Achieve $1 Billion in Annual Sales with Strong Cash Flows and Sustainable Margins, Resulting in Superior Value Creation for Shareholders
Introduces Diverse Slate with Expertise in Corporate Governance, Ecommerce, Finance, M&A and Strategic Growth Across Relevant B2B and B2C Categories
Steven Urvan (together with the other participants in his solicitation, the “Urvan Group” or “we”), who owns approximately 17.1% of the outstanding common shares of AMMO, Inc. (NASDAQ: POWW) (“AMMO” or the “Company”), today announced his nomination of seven highly qualified candidates for election to the Company’s Board of Directors (the “Board”) at the 2022 Annual Meeting of Shareholders (the “Annual Meeting”). In addition, the Urvan Group issued the below letter and launched the following hub to house shareholder resources: www.TheUrvanGroup.com.
***
Fellow Shareholders,
I am AMMO’s largest shareholder, with an approximately 17.1% stake in the Company that is presently worth roughly $80 million. I amassed my personal shareholdings and joined AMMO’s Board upon completing the sale of GunBroker.com, which I founded with my own capital and led to many years of profitable growth prior to last year’s transaction with the Company. It is my honor to be firmly aligned with you as a shareholder and represent your interests in the boardroom as a director.
Based on my conviction in the long-term value that can be unlocked at AMMO, I recently decided to exercise my right as a shareholder to nominate a full slate of highly qualified director candidates, including myself, for election to the Company’s Board at this year’s Annual Meeting. I recognize this is a relatively extraordinary step for a sitting director. That is why I am writing to you today in my capacity as the leader of the Urvan Group. This letter is intended to convey three key points that are expanded upon in subsequent sections:
I want to take the opportunity to note that my status as a sitting director leads me to believe it is not appropriate for me to directly opine on AMMO’s recently announced plan to split up the Company. With that said, I am comfortable confirming that my slate’s strategy accounts for keeping the Company’s Ammunitions and Marketplace businesses together until a reconstituted Board can conduct a fresh assessment of the enterprise. We plan to retain experienced and independent advisors – with demonstrated expertise in our industry and strategic reviews – to evaluate the long-term pros and cons associated with splitting up these perceptibly synergistic businesses at this time.
I also want to take this opportunity to state that my decision to nominate a slate is about creating sustained value for each and every one of AMMO’s shareholders. To be clear, I am not seeking to acquire all or part of the Company. I am not seeking to take any steps that are counter to your interests. I am investing my own energy, money and time in a campaign to ignite a brighter future for all of the Company’s stakeholders.
WHY THE URVAN GROUP IS SEEKING TO CATALYZE POSITIVE CHANGE AT AMMO
I founded GunBroker.com more than 22 years ago. During my tenure as its Chief Executive Officer, I grew the platform from an idea into the world’s leading online marketplace for the purchase and sale of firearms and ammunition. GunBroker.com had more than 6 million registered users when it was sold last year, demonstrating that my team and I were adept at driving sustainable growth and producing meaningful value.
As a founder and entrepreneur, I was involved in every facet of GunBroker.com’s operations and helped the platform scale in a cost-effective, scrappy manner over many years. I personally oversaw areas such as strategy, finance, marketing, technology and human capital management. Thanks to this high-touch approach and ownership mentality, GunBroker.com boasted the following financials at the time of last year’s transaction:
In contrast, AMMO’s financials show the Company has been burning cash and was unprofitable every single quarter prior to the GunBroker.com acquisition. The acquisition finally brought the Company to profitability thanks to GunBroker.com’s dynamic customer base and sustained cash flows. In fact, during the Company’s earnings call for the first quarter of Fiscal Year 2022, management attributed 70% of AMMO’s profit and margin growth to the acquisition, noting that GunBroker.com had “added over $12 million of high-margin marketplace revenue during the quarter.”1 Perhaps this is why discussions on online forums indicate the Company’s shareholders are confounded by management’s recent decision to unwind the transaction less than 18 months after it closed.
Many shareholders also appear to believe there have been issues around integrating the acquisition, improving online sales, managing cash and communicating the Company’s long-term value proposition. There seems to be a growing view that these issues have been keeping the Company’s share price and valuation multiple depressed. Fortunately, we feel shareholders’ concerns are addressable without unwinding an acquisition that is starting to dramatically improve the Company’s performance.
THE FACTS PERTAINING TO AMMO’S HISTORY AS A PUBLIC COMPANY
For the five years leading up to the acquisition of GunBroker.com, AMMO’s financials reveal rising expenses, compressed margins and sustained losses. The Company’s annualized sales, general and administrative expenses rose more than 320% between Fiscal Year 2017 and Fiscal Year 2021.2 During this period, the Company endured five straight years of net losses, resulting in well over $40 million in total losses.3 Further, it appears that the recent onset of meaningful revenue growth delivered by the legacy Ammunitions segment has had little impact on the bottom line.4
AMMO’s public disclosures also reveal a number of relevant facts pertaining to the Company’s corporate governance. The Company’s Chairman and Chief Executive Officer, who is 80 years old and has served in such roles since 2016, controls an entity holding a $3.5 million loan to AMMO that earns 12% annual interest.5 Over the years, he and the Company have entered into multiple lending arrangements. The Company also maintains a seven-member Board with multiple insiders and directors at or over 75 years of age.6
A review of the Board’s experiences and skill sets indicates there is a need for expertise in firearms, ammunition, ecommerce and other key areas. In addition, aside from myself and the Chairman, who has been consistently granted shares, there is also limited share ownership on the Board. We believe that a Board with relevant expertise and strong ownership perspectives is better positioned to drive improved capital allocation, effective oversight and value-enhancing decisions.
While one could claim AMMO is on the right track due to its perceptibly high long-run total shareholder return (“TSR”), it is important to remember that the Company is a micro-cap entity that began trading in the $2 range. It may be more instructive to consider what the Company has done recently. Since the GunBroker.com transaction closed, it has delivered TSR of -42% and is dramatically lagging logical peers:
AMMO & Peers7
Total Shareholder Returns Since May 3, 20218
AMMO
-42.04%
Clarus Corporation (NASDAQ: CLAR)
46.72%
Olin Corporation (NYSE: OLN)
28.21%
Smith & Wesson (NASDAQ: SWBI)
-23.11%
Vista Outdoor (NYSE: VSTO)
-11.60%
It seems most of this share price decline has been driven by the decision to walk back the GunBroker.com acquisition despite it being described by management as “transformative” just a year ago. Notably, the Company’s recent announcement to split the businesses was followed by a nearly 30% drop in share price.9
WE BELIEVE WE HAVE THE RIGHT PLAN AND RIGHT INDIVIDUALS TO PRODUCE SUPERIOR LONG-TERM VALUE
Given AMMO’s distinct assets, significant brand potential and strong positioning in growing addressable markets, we believe the Company can evolve into a diversified, growing and profitable ecommerce powerhouse. To achieve this, our nominees believe the Company needs to focus on a new set of strategic priorities. A high-level and preliminary overview of these priorities includes:
In the coming weeks, we look forward to sharing more detail regarding our strategy for unlocking the full potential and value of AMMO. We intend to issue a public presentation prior to this year’s Annual Meeting to provide the market with a very clear sense of our plan, tactics and transition planning.
In the meantime, I am pleased to share summarized biographies for the Urvan Group’s seven-member slate:
We thank you in advance for your consideration and willingness to evaluate the Urvan Group’s plan and slate. To join our mailing list and share your views on AMMO, we invite you to visit www.TheUrvanGroup.com.
Sincerely, Steve Urvan
***
Certain Information Concerning the Participants
The Urvan Group intends to file a preliminary proxy statement and accompanying GREEN Universal proxy card with the Securities and Exchange Commission to be used to solicit votes for the election of its slate of highly-qualified director nominees at AMMO’s 2022 Annual Meeting.
THE URVAN GROUP STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE SOLICITATION STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE SOLICITATION STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.
The participants in the solicitation are anticipated to be Gregg Alper, Darren Farber, William L. Fraim, Susan T. Lokey, Christos Tsentas, Steven F. Urvan and Wayne R. Walker.
As of the date hereof, Mr. Urvan directly owns 20,040,000 shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”). As of the date hereof, Ms. Lokey directly owns 40,000 shares of Common Stock. As of the date hereof, none of Messrs. Alper, Farber, Fraim, Tsentas, or Walker beneficially owns any shares of Common Stock.
_______________________________
1 AMMO, Inc. (POWW) CEO Fred Wagenhals on Q1 2022 Results - Earnings Call Transcript (August 16, 2021). 2 Company filings. 3 Company filings. 4 Company filings. 5 Company proxy statement. 6 Company proxy statement. 7 Company does not define its peer set in SEC filings. The Urvan Group determined AMMO’s custom peer set by examining competitors’ businesses, products and market share. 8 Total shareholder returns calculate from May 3, 2021, the day the GunBroker.com acquisition closed, to August 25, 2022, the day the Urvan Group submitted its nomination notice to the Company. TSR includes dividends reinvested. 9 AMMO share price opened at $5.85 on August 15, 2022 (the morning the Company announced plans to divest GunBroker.com) and closed on August 22, 2022 at $4.11 (a week after the Company’s announcement).
View source version on businesswire.com: https://www.businesswire.com/news/home/20220829005245/en/
For Investors:
Saratoga Proxy Consulting John Ferguson / Joe Mills, 212-257-1311 info@saratogaproxy.com
For Media:
Longacre Square Partners Greg Marose / Charlotte Kiaie, 646-386-0091 gmarose@longacresquare.com / ckiaie@longacresquare.com
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