Shareholders dig for details on DIRTT
Questions remain over recent upheaval
On the surface it would seem t hings have returned to a more normal situation at DIRTT Environmental Solutions after what has been an unusual start to the year.
On the first work day of January, the board of the Calgary- based company made two significant executive changes, seemingly with little involvement from the executives: the former chief executive, Mogens Smed, was made executive chairman while the president and acting chief financial officer, Scott Jenkins, was shown the door. In their place, the company named two interim replacements, one, Michael Goldstein, with the CEO handle and the other, Peter Henry, with the CFO handle.
Investors reacted negatively: the shares fell to $4.94 from the previous close of $ 6.74 ( on an intra day basis the shares hit $ 4.94). They closed Friday at $5.75, a “well undervalued” price according to Steve Parry, DIRTT’s chairman.
As for the return to normal, two weeks back DIRTT announced a “go forward plan,” including the launch of a strategic assessment and more shareholder engagements. Many of those plans are normal course of business but come a few months after management did an investor tour, which had a positive effect on the share price.
But beneath the surface much is going on, as shareholders try to seek a better understanding of the recent changes and the reasons and the process under which those decisions were made.
Darrin Hopkins, a director at Richardson GMP — whose clients have been long- term shareholders of DIRTT — is front and centre in trying to find answers to the sudden change in the company’s leadership ranks. But Hopkins isn’t alone: he is in contact with other investors, particularly from the U. S., who are also concerned with the sudden departure and/or new roles given to the company’s two longest- serving employees.
Hopkins has written the company seeking answers to a series of questions about the process and the thinking. He has also sent the directors an affidavit — given in March 2017 — by a director of Photon Control Inc. That affidavit doesn’t cast Goldstein, DIRTT’s interim chief executive, in a good light. Goldstein was Photon’s acting chief executive from June 26, 2016, to April 1, 2017.
But Hopkins has been largely shunned.
Friday we spoke to Steve Parry, who is transitioning into the role of independent lead director. Parry, whose day job is chief executive of Grenville Strategic Royalty Corp., said the board “is completely confident in the hiring decisions that we made and the process (employed) were in the best interests of the corporation.”
As for the affidavit, which was given in the B. C. Supreme Court by Michael Torok, Parry said it provides “an incomplete picture of the story and we are very confident having reviewed all the available information that our decisions are correct and well justified by our due diligence.”
If Hopkins had read more, “he might have a different opinion,” noted Parry who said Hopkins “is presenting one piece of information in a much larger file.” We were unable to reach Goldstein for a comment on Friday.
Parry didn’t specifically i ndicate whether all the board members were aware of the affidavit before hiring Goldstein. “It would not be appropriate to comment on a confidential employee due- diligence process.” But in a letter obtained by the Post, Parry said the board “conducted an independent review of Mr. Goldstein’s experience.” The letter added that Torok’s affidavit does not raise “any significant or genuine issue regarding Mr. Goldstein’s experience or capability.”
And Parry isn’t in favour of giving Hopkins more information. It’s “not appropriate,” he said. When asked where shareholder rights end and where a company’s rights start, Parry said: “That’s a question for a lawyer.”
As for interim replacements, Parry said, “it’s not uncommon” if the company is making “a series of incremental changes over time.”