Spear Point Capital Management is an activist investment firm that seeks to achieve a high level of total return by investing in undervalued, publicly traded companies and applying activist strategies to unlock long-term shareholder value.
Co-founder and managing member Ron Bienvenu, who is a Louisiana native, has set up headquarters in New Orleans as well as an office in Connecticut.
Prior to Spear Point, Bienvenu was a software entrepreneur back in the 1980s and started a number of companies in the years after that. He was then a founder and managing partner of investment firms specializing in investment and strategic transactions in information technology and other sectors.
He now describes his average day as not average at all. “Seriously, no two days are the same — ever.” “Since we cannot control the world, they have to be prepared to completely change focus at a moment’s notice.”
Spear Point currently has six highly specialized and talented individuals, including three partners, working at the company. They identify deep value situations where they believe a catalyst will unlock value and where they can influence that catalyst.
“We believe we have a competitive advantage over many other hedge funds because we really don’t need to use expensive outside advisors on a day to day basis.”
Even with said advantage, 99 out of 100 investments will fail one or more of Spear Point’s investment criteria.
Spear Point takes a slightly different approach when deciding which companies to invest in. “Unlike many other hedge funds and investors, they start with an analysis of the balance sheet rather than the income statement. They are looking to find companies where their net asset value exceeds their current market value.
“If this is the case, the company’s operations are struggling to create value,” Bienvenu shared. “So one way of thinking about it is the following: What if I owned the entire company and decided to sell it tomorrow? What could I reasonably expect to get for a sale of the assets and the operations of the company?”
If they identify a likely candidate, the team begins analyzing the operations of the business with the goal of answering two questions: 1) Why is this company so poorly valued by the market? And 2) If we owned this company, what would we do differently to unlock the value of the balance sheet and the operations of the business?A few additional steps and tests are taken to see if it’s worth the investment. “If a company passes all of these tests, our next step is to begin acquiring what we call a ‘toe hold’ position in a company – ideally about 2.5% of the company’s shares.”
“After that, we generally will reach out to the company and ask to meet with the management and discuss our thoughts on the company’s strategy and performance. In truth, everyone is polite, but there is distinct air of uncomfortableness,” said Bienvenu.
The firm received tons of media attention in 2013 when Bienvenu sent a letter to shareholders of financial news and services website TheStreet, challenging its current strategy and suggesting a rework after a previously mailed letter.
After two years, Bienvenu says they are still trying to get the company to change management and strategic directly, “but it’s tough going…The CEO has a lock on the board and has even gone as far as to tell board members not to talk to shareholders.”
A shocked Bienvenu explains, “As far as I know, corporate governance for public companies is as follows: The Board of Directors works for the shareholders and the CEO works at the behest of the Board. The Board does not work for the CEO, which is what we feel is the case at TheStreet. We intend to change that.”
Spear Point is now working on two other projects. The first, and most colorful, according to Bienvenu, has been a company called Imation (NYSE: IMN). Along with other activist investors, they succeeded in replacing the CEO and Chairman at what Bienvenu calls a highly contentious shareholder meeting earlier this year. They now have a “solid management team in place,” says Bienvenu.
“This campaign was the stuff of movies, with angry shareholders, arrogant board members and clueless senior managers clashing in a rather public manner,” Bienvenu tells Silicon Bayou News.
There can be no guarantees, but Bienvenu believes if the company had continued down its previous path, all shareholders would have been far worse off.
The third major holding in the portfolio is a company called GSE Systems, Inc. (NYSE MKT: GVP), which primarily provides simulation technology and staffing services for the nuclear energy industry.
A few years ago, the company’s growth prospects dwindled, but they still had a great installed base of customers and a strong balance sheet. “We felt by changing its focus from a business services company to a more software and technology focused business, the company could leverage its impressive customer base and achieve growth and profitability by up-selling them with technology solutions,” said Bienvenu.
Financially, to date, their greatest success this year has been GSE Systems, which was up 18% in the last few months, but is up 61% since touching an all time low on December 8, 2014.
Personally and professionally, Bienvenu believes their latest and greater overall success has been with Imation because “it has the most potential to create really eye-popping returns when the market understands the underlying value of the balance sheet and the operations. Additionally, that value would never have been unlocked without Spear Point and other shareholders forcing out a greedy and incompetent management and board.”
Bienvenu had one closing reminder: “Our business isn’t a zero sum game. When we make money, hundreds, if not thousands, of other shareholders also make money.”
Most recently, he made an appearance on Benzinga’s PreMarket Prep show last week to discuss Spear Point. Listen to the segment below: