The second-largest shareholder of Tronc, which owns The Los Angeles Times and The Chicago Tribune, among other newspapers, has criticized the company of “poor corporate governance” in a letter sent to Tronc’s board.
Earlier this week, biotech entrepreneur Dr. Patrick Soon-Shiong revealed in regulatory filings that he had increased his stake in Tronc from 16% to 24%, after buying 950,000 shares from the investment firm Oaktree Capital, a longtime Tronc shareholder.
That puts Soon-Shiong just a hairs' breadth away from owning as much of the company as its current largest shareholder, non-executive chairman Michael Ferro, whose Merrick Ventures owns 24.8%.
In the letter from Soon-Shiong sent Monday, his lawyer John B. Quinn
says Nant Capital, Soon-Shiong’s investment firm, “is troubled by the company’s corporate governance, or lack thereof,” according to a New York Times
He asked Tronc’s board to share the company’s books and records with him. The letter suggests that the mismanagement of the company is a reason for Tronc’s stock trading “at a meaningful discount” to the price Nant paid for its shares. Last May, Nant Capital invested $70.5 million to acquire about 13% of Tronc, then called Tribune Publishing, at $15 a share, fending off a takeover by Gannett.
Soon-Shiong added he was "surprised to learn” Tronc was raising the cap on the stake that Ferro can acquire to 30%, from 25%. According to The Wall Street Journal, Soon-Shiong’s lawyers plan to “request his contract also be amended to allow his stake to also be increased to 30 percent from 25 percent.”
In a statement acquired by the NYT, Tronc said it had reviewed Soon-Shiong’s letter and found it to be “filled with misstatements and baseless innuendo,” and added that it intends to respond to Nant Capital soon.
As of Tuesday afternoon, Tronc stock is sitting at $13.84.
This month, Tronc unexpectedly removed Soon-Shiong from the list of directors that shareholders can elect at the company’s annual meeting in April. He will no longer serve on Tronc’s board.
Tronc also announced that it was buying back the 3.75 million shares held by Oaktree Capital.
Ferro, a technology entrepreneur, wants Tronc to use artificial intelligence and new technology to spice up its journalism. Last summer, he shared his idea for the company to produce 2,000 videos a day using artificial intelligence.The company’s total revenue last year was down 4%, to $1.6 billion. Advertising revenue for the publishing businesses dipped by 11%, while digital ad revenue was up 1%.