One of Daktronics’ largest shareholders issued a blistering statement to the company’s independent review committee Thursday, demanding leadership changes and an “immediate and certain liquidity solution.” 

The group, Alta Fox Capital Management, LLC, said it now owned 5.8% of Daktronics’ outstanding common shares and that it had been “adamant about the urgent need for governance improvements, leadership changes and an immediate and certain liquidity solution,” in private meetings before sending the public letter.

The letter also stated the company had “no confidence” in CEO Reece Kurtenbach or CFO Sheila Anderson.

In response, Anderson sent the following statement to The Register:

“As the company noted in its Jan. 25, 2023, press release, the board’s strategy and financing review committee is working with independent financial and legal advisors to ensure the company is on solid financial footing. 

We have already made tangible progress by working with our current lender to extend a $10 million maturity on the company’s credit facility. The committee is now focused on longer-term liquidity and is actively reviewing alternatives, including several proposals that the company has received. We expect to engage with Alta Fox on its proposal in connection with this review, as we have told Alta Fox on numerous occasions.”

Daktronics released a statement Wednesday announcing it had amended its credit agreement with US Bank to extend the maturity of $10 million of its $45 million credit to May 1, 2023. The remaining $35 million of the credit is due April 29, 2025.

Daktronics stock plunged nearly 40 percent on Dec. 7 after the company filed documents with the Securities and Exchange Commission that “raise substantial doubts about our ability to continue as a going concern.”

The filing with the SEC postponed the company’s quarterly earnings report until Dec. 12 and described a harsh financial situation at the company and stated Daktronics was seeking to bolster liquidity “… through various means, including but not limited to obtaining financing secured by a mortgage on our facilities, a sales-leaseback transaction, leasing property and equipment and continued focus on reducing working capital.”

The narrative in the SEC notification of late filing went further, reading “the Company also expects to conclude that its disclosure controls and procedures and internal control over financial reporting were not effective as a result of material weaknesses relating to the lack of adequate and appropriate financial reporting.”

Kurtenbach released a statement the following week after the company held a belated earnings call for stockholders, saying in part, “This ‘going concern’ language does not inhibit us in any way from executing on our current business operations and we continue to hire for production and service to support our growing business.”

Founded in 1968 by a pair of South Dakota State professors, Daktronics employs more than 2,000 people, the majority at its Brookings headquarters. It also operates in Sioux Falls, Redwood Falls, Minn., China and Belgium. It is one of the world’s largest suppliers of large-screen video displays and electronic scoreboards.

Alta Fox describes itself as “a Texas-based alternative asset management firm that employs a long-term focused investment strategy to pursue exceptional risk-adjusted returns for a diverse group of institutions and qualified individual clients.”

Alta Fox has acted as an activist hedge fund before. In 2022 it attempted to force Hasbro to spin off its Wizards of the Coast playing card and gaming business, but Hasbro’s investors rejected Alta Fox’s board candidate. 

Wall Street, meanwhile, boosted Daktronics stock price on Thursday. The stock closed at $3.62 per share, up nearly 10 percent.

Josh Linehan is the Register’s managing editor and welcomes comments at jlinehan@brookingsregister.com