Fermi Investor Urges Sale After Perry Wins Just 38.9% of Shares
Toby Neugebauer, Fermi's largest shareholder, says Rick Perry lost his board seat under a new bylaw and urges a sale. The vote and the dispute.
Toby Neugebauer, the co-founder and largest shareholder of Fermi Inc. (Nasdaq: FRMI), said on Nov. 6 that Rick Perry failed to win re-election to Fermi’s board and called on the company to put itself up for sale. According to Neugebauer, only 38.9% of Fermi’s outstanding shares voted to keep Perry as a director at the Oct. 30 annual meeting.
His statement, issued through PR Newswire, responds to the meeting results and to a Form 8-K that Fermi filed on Nov. 4. Neugebauer argues that Fermi should sell or find a partner while it finishes a tenant deal, and says shareholders “will not accept a recapitalization that wipes them out.”
How a bylaw change decided Perry’s seat
Neugebauer says the board amended Fermi’s bylaws on Aug. 11 without a shareholder vote. Under the new rule, a director must win a majority of all outstanding shares, and any share that does not vote “for” a candidate counts the same as a vote against. In his view the rule was meant to make it harder for shareholders to replace directors. He says it ended up costing Perry the seat, and that under the old plurality rule Perry would have kept it even if every share his family controls had voted against him.
By Neugebauer’s count, more than 61% of outstanding shares did not back Perry. Excluding the 68,842,821 shares the Perry family last reported owning, he says only 31.5% of the remaining shares voted for Perry, who trailed the other director on the ballot on every measure.
A dispute over a nomination agreement
Fermi has accused Neugebauer of breaching an agreement by withholding his votes from Perry. Neugebauer calls the claim false. He points to a Director Nomination Agreement under which Caddis, the company of Griffin Perry, keeps its right to name a board nominee only while it beneficially owns more than 50% of the shares it held at the IPO.
Fermi’s IPO filings listed Griffin Perry as the beneficial owner of 128,196,450 shares, Neugebauer says, while Caddis now reports 52,256,833, or about 40% of that figure. He says he asked for a sworn affidavit confirming Caddis’s holdings after Fermi’s lawyers wrote to him less than a day before the meeting, and that no signed affidavit has arrived. Neugebauer, who voted the shares as trustee of a trust, says his fiduciary duty kept him from supporting a director he believes is breaching his duties.
What it means for Fermi shareholders
Neugebauer says Fermi’s stock has lost more than 80% of its value since he suspended his proxy campaign on July 3, and that the shares traded at more than five times the latest closing price at that point. He argues that new stock sold now raises about one-fifth of what it would have raised then.
On May 22, he says, he proposed running a sale or partnership process alongside the standalone plan, when indicative enterprise valuations for Fermi ran from $10 billion to $20 billion. He says several large investment banks approached Fermi and were turned away, and that the board never ran the process he stepped back to allow. He wants a partner that brings a lower cost of capital, construction expertise and a customer.
Tenant talks and the lawsuit
The company is trying to sign a tenant that will use its private power supply for AI companies. Neugebauer says former senior management was negotiating with TensorWave and a second company and expected to close a larger lease with TensorWave by June 30. He says the board has not announced that closing conditions such as secured financing have been met.
Neugebauer also has a lawsuit pending against the company, and he says discovery in that case is underway. He has asked the board to release its written communications with him and to let him publish his own.
Source: PR Newswire
