Revolution Technologies is Losing the Revolution

Last Month, Revolution Technologies received a Marcum Award as one of the fastest growing tech companies in  Connecticut.  This week, it’s CEO states the company may be forced to restructure.

The Robert LaPenta, the CEO, stated in a letter to the Board of Directors that Company’s ongoing liquidity needs,  likely cannot be addressed through third party funding and he wants to take the company private at $2.00 per share.  Five years ago, the stock price was in the $34 range.  Six months ago it was about $3.75.  Wednesday morning the stock was trading slightly above $2.50 per share. Thursday it closed at $1.58.

Companies like Revolution Technologies probably never should have gone public to begin with.  The reporting requirements of publicly traded companies is a tremendous burden–along with the quarterly pressures to make the numbers.  But there is something troubling about watching a company lose its value and to have the existing CEO take it for a fraction of its original market cap.

Below is the letter from the CEO to the Board of Directors.

Gentlemen:

We write to you in connection with your roles as independent, disinterested members of the Board of Directors of Revolution Lighting Technologies, Inc. (the “Company”) and on behalf of RVL 1, LLC  (together with its affiliates and certain related persons, “we” or “us”).  As you are aware, we beneficially own approximately 46% of the Company’s outstanding common stock and have provided various capital support to the Company in the form of letters of support, guarantees under the Company’s Revolving Credit Facility and promissory notes.

We are constantly evaluating our investment in the Company and the Company’s business, financial performance and liquidity situation.  The Company’s recent financial performance has made clear to us that, in our opinion, the Company can no longer continue to operate in the way it historically has operated.  The Company’s ongoing liquidity needs, which we do not believe can be addressed through third party funding, are likely to require us to provide additional funding, which we are reluctant to do at this time given the Company’s current operations and cost structure.  Without additional funding, we believe that the Company may be forced to consider various restructuring alternatives in the near term.

Simply put, we do not believe that it is in the best interests of the Company and its stockholders to continue as a publicly traded enterprise, as we believe it currently lacks sufficient scale and the ongoing costs of maintaining the reporting and related infrastructure necessary for public reporting are a significant financial burden on the Company.  In addition, we believe the constant pressure to meet quarterly earnings targets has been a significant distraction to the Company’s management and has prevented management from appropriately focusing on the long term growth and the development of the Company’s business.

As a result of the above factors, we propose to acquire all of the common stock of the Company that we do not currently own for a price of $2.00 per share.  Given our familiarity with the Company, we would not need to conduct any further due diligence on the Company and would be in a position to sign a definitive transaction agreement quickly.  Our proposal is conditioned on the Board of Directors forming a fully empowered and properly constituted special committee of independent directors, which is empowered to select its own advisors, to consider the fairness to the Company’s stockholders of our proposal (or any other strategic alternatives) and negotiate the terms of any definitive documentation with respect to any resulting transaction.  Our proposal is further conditioned on the approval of holders of a majority of the Company’s disinterested stockholders.  We have sufficient cash and liquid assets on hand to fund the transaction consideration and satisfy the related fees and expenses in connection therewith.

While we recognize that our offer represents a discount to the current trading price of the Company’s common stock, we do not believe that the current trading price accurately reflects the Company’s current financial performance or liquidity situation.  We believe that our offer represents the best value that the Company’s stockholders could reasonably expect given the current circumstances.  However, we are supportive, and in favor, of the Company exploring and potentially pursuing other strategic alternatives that maximize stockholder value.

We are available at your convenience to discuss our proposal and look forward to constructively working with you to determine the best path for the Company to realize value for all of its shareholders.