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SurfStitch chairman Howard McDonald is under pressure to update investors on the likelihood of a takeover offer as shares in the online action sports retailer sink to record lows.

Six weeks after co-founder and chief executive Justin Cameron resigned, reportedly to work on a privatisation bid, the board has yet to communicate with shareholders on the outlook for earnings, potential acquisitions, changes in strategy or the chances of an offer.

"They've been on radio silence and that's been one of the main complaints," said one investor. "It's been impossible to get anything from the company."

SurfStitch shares fell as much as 12 per cent to a record low of $1.01 on Tuesday – just above their $1 a share issue price. The shares closed at $1.09, taking losses since a quasi-profit downgrade in February to 37 per cent.


"The shares would not be ($1.09) if there was a takeover brewing," one investor said.

The fast-growing online retailer shocked investors in March by revealing that Mr Cameron, who co-founded the company with Lex Pedersen in 2007, had resigned unexpectedly as chief executive and was considering a potential privatisation bid, backed by private equity investors.

Mr Cameron's emailed resignation came just two weeks after SurfStitch backed away from its full-year earnings forecasts, saying it wanted to have the flexibility to invest in online content such as surf documentaries and music videos to boost sales of board shorts, bikinis and surfboards.

Mr McDonald agreed with shareholders that the timing of Mr Cameron's resignation was unfortunate, saying "the optics aren't good".


SRF

• BBG

SURFSTITCH FPO (SRF)
$1.090.000.00%
volume 0value 0.0

• 5 YEARS
  
• 1 DAY

Aug15GMT+1000 (AUS Eastern Standard Time)Dec14Apr1611.50.9481.926
Last updated: Wed Apr 27 2016 - 7:41:13 AM AEST
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Company Profile



Internet & Catalog Retail (255020)

ASIC

ASX Announcements
17/3/16 Appointment of Joint CEOs
15/3/16 Change in substantial holding
10/3/16 SurfStitch Group Company Update
9/3/16 Appendix 3B
2/3/16 Change in substantial holding
VIEW ALL ANNOUNCEMENTS
Only four months earlier, in November 2015, SurfStitch had raised $50 million in a share placement at $2 a share to fund a series of acquisitions, including Garage Entertainment, which makes videos such as The Bra Boys, and surfboard and accessories manufacturer Surf Hardware International.

One investor suggested the company's actions amounted to a "classic pump and dump" and queried whether the corporate regulator should be inquiring into the circumstances behind the capital raising, the profit downgrade, Mr Cameron's resignation and talk of a privatisation bid.

Another shareholder, Mark Maloney, has taken matters into his own hands and is understood to have approached SurfStitch seeking a seat on the board.

Mr Maloney, the executive chairman of private equity firm Intrepic, chairman of Sumo Salad Group and former managing director of mining services company MAC Services, has developed a plan to restore market confidence in the company and has been in talks with SurfStitch's 10 largest shareholders.


A spokesman for Mr Maloney said the plan, details of which have not been disclosed, would be taken to the board for consideration.

"Mr Maloney appreciates the hard work being undertaken by the board and management, but he also realises the market's frustration in wanting to be presented with a clear picture on SurfStitch's future direction," the spokesman said.

Mr Maloney was the former chairman and major shareholder in Garage Entertainment and acquired a small stake in SurfStitch when the retailer acquired Garage in November last year.

The board's response to Mr Maloney's approach is said to have been "polite". However, some investors have questioned whether Mr Maloney would bring the necessary retail skills to the SurfStitch board.



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