After weeks of back-and-forth accusations and finger-pointing, TEGNA shareholders on Thursday will either vote for board of directors nominees the broadcast TV company solidly backs, or select individuals suggested by major shareholder Standard General.
The vote comes after Standard General‘s attorneys earlier this week were forced to assail and fully explain the nature of a lawsuit filed against its founder for alleged “short-swing” stock moves. As they see it, “a secret client” of a political consulting firm is behind the New York Federal District Court filing — made by a serial plaintiff in short-swing matters.
With near-daily press communication from both parties, all will end Thursday, at the TEGNA annual shareholders meeting.
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Ahead of the event, TEGNA has decided to sweeten its shareholders by declaring a sugary dividend.
The company’s board today (4/29) declared a dividend of 7 cents per share.
It is payable on July 1 to stockholders of record as of the close of business on June 5.
“TEGNA’s positive momentum continued in the first quarter of 2020 as we continue to execute on our five-pillar strategy during these unprecedented times,” said Dave Lougee, TEGNA’s President/CEO and a point person fending off Soohyung Kim, the founder and head of Standard Media. “With our prudent capital structure and focus on our strategic vision, we remain positioned to create value for our shareholders.”
Kim and his group disagrees, and has been lobbying relentlessly to gain influence with a board seat. This has resulted in a soap opera highlighted by details in the lawsuit that largely match arguments made by TEGNA itself that Kim indeed engaged in “short-swing” activity.
As TEGNA and the plaintiff in the New York case, Donna Ann Gabrielle Chechele, see it, Standard General in August and September 2019 purchased stock and derivatives in TEGNA that gave Kim 10% of the voting rights of the company, in stock and equity derivatives. in January 2020, Kim announced his intent to replace four members of the TEGNA board of directors with members of his own choosing.
While Kim and Standard General held 10% of the equity of TEGNA as of the record date to vote the stock in the proxy contest, Standard General had started to “actively sell” 5 million shares of TEGNA stock, or about 25% of its holdings, Chechele argues, matching previous claims by TEGNA.
Kim then immediately repurchased the shares he sold, earning $800,000 from the move.
The stock purchases, and related derivative ownership, subjected Kim and Standard General to SEC jurisdiction as a control person of TEGNA, the Chechele case states.
The sale of TEGNA shares was acknowledged April 1 by TEGNA. In a short but blunt statement, the Tysons, Va.-based owner of such stations as KGW-8 in Portland, Ore., and WUSA-9 in Washington, D.C., took aim at a Schedule 13D amendment filed with the SEC by Standard General. It called the filing “troubling” for all TEGNA shareholders. Why? “Just one day after describing itself in a letter to shareholders as ‘the largest active shareholder of TEGNA’ with a 9.7% ownership position, Standard General … disclosed that it sold approximately 25% of its shares shortly after the record date and instead took derivative positions.” This reduced its stock ownership position.
Even so, TEGNA acknowledged that Standard General was able to retain its ability to vote all of the shares it held prior to those sales at the annual shareholders’ meeting, on schedule for 8am Eastern on Thursday (4/30).
Asked for comment regarding Chechele’s claims, a Standard General spokesperson told RBR+TVBR, “All of our trading has been fully transparent and on-the-record, as well as in full compliance with all applicable laws. This is simply another attempt by TEGNA to distract from the fact that we have expanded our ownership.”
RBR+TVBR obtained a copy of the lawsuit and what appeared to be a press release falsely stating that Chechele had accused Kim of “insider trading” on April 24. RBR+TVBR opted to wait until April 27 to offer coverage of the lawsuit, in order to properly vet the validity of the filing and seek details regarding Chechele.
An investigation by RBR+TVBR determined that Chechele is a serial plaintiff who isn’t new to bringing such cases in front of Federal judges. In January 2016, Chechele sued Bluebird Bio, but voluntarily dismissed the lawsuit one month later; it was a “short-swing” trading allegation. In September 2012, Chechele was a plaintiff in a lawsuit against Morgan Stanley that also sought to recover “short-swing profits.” Three other cases filed in the early 2010s saw Chechele as a plaintiff.
Meanwhile, the lawsuit and media outreach came not from a plaintiff’s representative but from Tusk Strategies VP Baxter Townsend.
In this role, Townsend “designs and runs creative communications campaigns to help startups navigate the political, regulatory, and media hurdles that come with reshaping entrenched industries.”
Tusk describes itself as “the only venture capital firm that sits at the nexus technology, politics, and regulation.”
But, there appears to be more to the story. Following the RBR+TVBR report, Standard General on Tuesday sued Tusk Strategies, accusing the company of “blanketing the media with false and misleading proxy materials” on behalf of a “secret client.”
As such, Bloomberg reports, Standard General is asking the court to order TEGNA to submit proxy statements to the SEC, reveal the name of its client, and retract its “false and misleading statements.”
Townsend was notified by RBR+TVBR late Monday of Standard General’s concerns regarding her communication sent from Tusk regarding the Chechele lawsuit; the first edition of RBR+TVBR‘s story was based on Townsend’s materials that spoke of an “insider trading” case brought against Tusk. Roughly 90 minutes later, the first of two updates based on a further review of the matter were made by RBR+TVBR.
Townsend did not respond to RBR+TVBR‘s communication regarding the misleading outreach.
TEGNA shares were up 6.2% to $11.68 as of 2:50pm Eastern as Wall Street reacted positively to news that the Federal Reserve Bank has committed to near-zero rates as the U.S. economy has faced “sharp declines” in the wake of the COVID-19 pandemic.
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