- Parabolic Arc
- November 29, 2023
Terran Orbital Shareholders Call for Replacement of CEO Marc Bell
A group of Terran Orbital (NYSE: LLAP) shareholders, including three founders of the company’s main subsidiary, have sent a letter to Terran’s Board of Directors calling for the ouster of CEO and Chairman Marc Bell, and for a strategic review of the company’s direction, due to a 94 percent decline in the company’s stock price.
“Despite Terran’s significant competitive advantages, the Company is now meaningfully undercapitalized and operating from a position of weakness due to leadership missteps, lack of internal controls, poor corporate governance, and a loss of public market confidence,” the group said in a press release. “Moreover, the public markets have been unable to reflect the intrinsic value of the Company, which the Concerned Investor Group estimates to be at least $3.00 per share today.”
Terran Orbital’s shares closed at $0.72 on Thursday (October 12). The stock’s highest value ($12.69) occurred on the day it began trading, March 28, 2022. Terran Orbital went public after a $255.4 million merger with Tailwind Two Acquisition Corp., a special purpose acquisition company (SPAC) that was already traded on the New York Stock Exchange and whose sole purpose was to find a company to take public under its own name.
The shareholders, who said they own 8.4 percent of outstanding shares, included: Sophis Investments LLC; Roark’s Drift LLC; and Tyvak Nano-Satellite Systems’ co-founders Jordi Puig-Suari, Roland Coelho, and Austin Williams. Tyvak is a subsidiary that Terran Orbital acquired in 2014.
In their letter, the shareholder group called for three actions:
- The separation of the role of CEO and chairman, and the replacement of Bell with “a new CEO with demonstrable industry experience and a track record of outperformance, who can turn around the operational, cultural, and capital allocation issues plaguing the Company,”
- a reconstitution of the Board of Directors with the implementation of best-in-class corporate governance practices, and
- a comprehensive strategic review, involving outside financial and legal advisors, to “evaluate all strategic alternatives and opportunities available to maximize stockholder value.”
The shareholders said they have “identified a highly credible and qualified CEO candidate with over 30 years of relevant industry experience, operational and financial expertise, and leadership capabilities required to restore market confidence in Terran’s world-class offerings…”
“Based on our rigorous due diligence, we believe our CEO candidate can attract and work to close on more than $1.7 billion of potential satellite orders as well as a pipeline that spans more than 12 separate customers,” the letter said. “Furthermore, we believe that a new CEO, namely our identified CEO candidate, will help Terran to attract the needed capital on favorable terms, minimizing future dilution to stockholders and providing prospective customers and employees with the confidence to conduct business with the Company going forward. In addition, we believe, if installed, our CEO candidate would attract and retain world class talent.
“As just one example, provided these recommended changes are made, Austin Williams, former Terran Chief Technology Officer and Co-Founder of Tyvak, would welcome the opportunity to explore returning to the Company he helped build over the last 12 years,” the press release said.
Terran Orbital rejected the group’s criticism in a statement sent to Parabolic Arc on Thursday.
“The Company met with Sophis Investments last month and reviewed their recommendations regarding governance and strategic opportunities,” the statement said. “Sophis Investments suggested providing paid services to assist the Company in navigating such matters. The Company did not find any of their input to be innovative or reflect a true understanding of the Company or the industry, and so management declined to engage them.”
The statement asserted that Bell and the Board of Directors were not to blame.
“The Company believes its challenges are industry-wide with New Space SPACs and not due to specific missteps or issues with its corporate governance,” the statement said. “Their strategic recommendations are not novel to the Company, which has been exploring every potential way to continue to grow successfully and finance its operations in a very difficult market.”
“Every company in the new space industry that merged into a SPAC is dealing with the difficulty of raising capital in the current environment, winning business, generating revenue, and becoming profitable,” the company added. “Some have failed or are about to fail, but Terran Orbital has real customers and business, and we expect will be cash flow positive in 2024. The Company’s Board always welcomes legitimate shareholder feedback, will conduct a thorough review of the matter, as it should, and determine the best path for the Company.”
In February 2023, Terran Orbital announced that its Tyvak subsidiary had won a $2.4 billion contract to supply 300 communications satellites to Rivada Space Networks. The contract makes up the bulk of the company’s $2.6 billion backlog of orders.
Wall Street analysts have raised doubts about Terran Orbital’s ability to ramp up production and Rivada’s ability to pay for the satellites. In May, Bank of America analyst Ronald Epstein double downgraded the Terran Orbital’s stock from a “buy” rating to an “underperform” rating.
“In our view, Rivada is still a largely unknown customer and we remain concerned around the durability of its growth,” Epstein wrote at the time. “Additionally, while management appears confident in the company’s ability to raise capital, we remain skeptical around the market’s appetite. With that said, the company may be able to attract strategic investment.”