It may look like a simple squabble over board seats between two investors in a small Canadian public company. But the battle erupting at Optiva Inc. pits a former Team Canada hockey player against a quiet Texas billionaire accused of being a model for sexist “bro culture” in the tech industry.
Maple Rock Capital Partners said Monday it plans to nominate two directors to the board of Optiva, a Mississauga cloud-software company with a $200-million market capitalization, $132-million in sales over the past year and a long history of losing money. Maple Rock says its attempts to engage Optiva, including offering it financing, have failed, and it wants to replace two directors with ties to Optiva’s controlling shareholder, ESW Capital LLC.
“Maple Rock is concerned the company will be unable to reach its full potential with an ESW-controlled Board and ESW-affiliated CEO who are intent on running the company as though it were a private entity to the benefit of ESW and without appropriate checks and balances,” Maple Rock said in a statement Monday.
Optiva and ESW did not respond to requests for comment Monday.
Maple Rock, with offices in Corte Madera, Calif., and Toronto, is led by Xavier Majic, who played on Team Canada two decades ago. ESW’s founder is Joe Liemandt, who made Forbes’ 400 list of richest Americans in 1996 at the age of 27 with his software company Trilogy Development Group.
Trilogy, according to a recent Forbes article, “served as the model for Silicon Valley’s boys club.” The article notes that a 2018 book about gender in technology, Brotopia, said Trilogy “wrote the bro code” that many women have said makes the tech sector a hostile place for women to work.
Now, Forbes says ESW has a goal of acquiring tech companies and outsourcing their coders to low-cost locations such as Ukraine, Pakistan and Egypt. The November, 2018, article, How A Mysterious Tech Billionaire Created Two Fortunes – And A Global Software Sweatshop, said that in the past 12 years, ESW acquired about 75 software companies and was exporting as many as 150 high-tech jobs every week.
Optiva doesn’t fit perfectly with the pattern, because its shares remain on the Toronto Stock Exchange. ESW acquired its stake in the company by outbidding Canada’s Constellation Software Inc. in January, 2017.
ESW made a US$83.2-million equity investment that included a class of preferred shares that give it the right to nominate four of seven directors. All told, ESW came out with the equivalent of 39 per cent of Optiva.
ESW’s presence didn’t dissuade Maple Rock, however; the investment firm says it became Optiva’s second-largest shareholder in September, 2017, and now owns 22.1 per cent of the company.
The tipping point for the public activism came Jan. 20, when Optiva said it was “accelerating its strategic plan” by looking for US$100-million in new financing – part of which would possibly purchase ESW’s preferred shares – and changing “from a goal of managing to cash flow break even to a willingness to lose money.” The stock lost 20 per cent over the past week, and was down about 90 per cent from its all-time high in December, 2013.
After Maple Rock’s announcement, Optiva shares jumped 12 per cent Monday to close at $46.
Maple Rock wants to replace two of Optiva’s three independent directors: Christina Jones, a tech executive who’s now managing director of Carlisle Jones Ventures, and Farhan Thawar, a vice-president at Shopify Inc.
While the two qualify as independent under Canadian regulations, each worked for Mr. Liemandt’s Trilogy companies in the 1990s, according to their biographies or LinkedIn profiles. “Just because a director is deemed to be independent, it does not mean they are sufficiently objective to represent the interests of all shareholders,” Maple Rock said Monday.
Maple Rock has asked the company for a special meeting of shareholders no later than March 16 to consider its nominees, technology executives Ryan Morris and Andrew Day.