Activist investor Lawrence Seidman and Blue Foundry Bancorp continue to butt heads as the shareholder pushes the bank to sell.
Blue Foundry attempted to have a Seidman proposal — calling for the bank to hire an investment bank to facilitate a sale — excluded from its May 16 shareholder meeting. The company's legal counsel argued to the Securities and Exchange Commission that the proposal exceeded the 500-word limitation. However, the SEC ruled April 1 that the proposal falls within that threshold and could not be excluded from the company's annual meeting on those grounds.
In Seidman's proposal, introduced in November 2023, the investor urged the Rutherford, NJ-based bank to engage an investment banking firm to sell the institution or merge it with another bank in a deal that will "maximize stockholder value." Recently converted stock holding companies are prohibited from selling until three years after their conversion. Seidman's push comes ahead of the three-year anniversary date of Blue Foundry's conversion to a stock holding company from a mutual in July 2021.
"The greatest long-term value for [Blue Foundry] stockholders will be realized through the prompt sale or merger of the Company," Seidman wrote in the proposal.
With the annual meeting approaching, the company urged shareholders to vote down the proposal in its most recent proxy filed in April. According to the filing, the company in June 2023 retained an investment bank for advice on maximizing value, including the prospect of a sale. When asked if the engagement was still ongoing and what advice the adviser offered, Blue Foundry declined to comment beyond the proxy statement.
"The Board is open-minded to a merger as a means of maximizing shareholder value. But the proponent's antics and this proposal have the effect of placing a 'for sale' sign on the Company's door, which we do not believe is the best way to maximize shareholder value, even if a merger transaction is pursued by the Board," the proxy read.
Seidman disagrees. "The only way you can find out what you're worth is putting yourself out there," he said in an interview. "They can get much more than they're trading for."
In the proposal, Seidman argues the company's performance has lagged since its initial public offering in 2021, and stockholders will not "receive an acceptable return on their investment in the foreseeable future through [Blue Foundry]'s continued independent operation." The activist investor backs up his claim by pointing to analyst estimates for further losses.
In an April 24 note, Piper Sandler analyst Justin Crowley estimated Blue Foundry will see a loss per share of 69 cents in 2024 and a loss per share of 52 cents in 2025.
"If they are right, book value and franchise value will continue to erode the longer [Blue Foundry] exists as an independent company," Seidman wrote in the proposal. "In contrast, the sale or merger of [Blue Foundry] with a larger financial institution likely will provide stockholders with a substantial premium over present market value."
The activist, who owns about 175,000 shares in either his own name or through partnerships, pointed to the company's tangible book value, recent losses, stock returns and various profitability metrics as indicative of its subpar performance and why a sale is the most attractive outcome for shareholders.
As of April 29, Blue Foundry's stock price was trading at 0.59x tangible book value, down from 0.67x at Dec. 29, 2023, according to S&P Global Market Intelligence data. The company's stock price closed at $8.65 on April 29, compared to its IPO price of $10 per common share in July 2021.
Through March 31, the company has posted net losses in the past five quarters. Its efficiency ratio was 134% in the first quarter, while its net interest margin was 1.91%. Its return on average assets was negative 0.56%.
Seidman's qualms with the company date back to 2022, when he launched a proxy contest opposing a planned executive benefit plan and nominated two directors to the board. The company's shareholders approved the benefit plan despite opposition, and Seidman's director nominations did not go through.
