"Reality denial accusation": Stockholder issues public letter in response to vote to dismiss chairman (Ricardo)
The second-largest shareholder in the transport and energy consultancy firm Ricardo, Science Group, has criticized the company's governance and strategic direction, leading to a call for a vote to remove the current chairman, Mark Clare.
Science Group, holding a stake of over 22% in Ricardo, has initiated a move to oust Clare and address concerns over persistent underperformance, ineffective governance, and deteriorating financials. A general meeting of shareholders, aimed at removing Clare, has been called following the rejection of a bid to replace him and two other directors in March.
In a 5,000-word open letter, Science Group expressed disappointment with the board's "misaligned priorities" and accused the company of obliviousness to "the destruction in shareholder value for which they are ultimately responsible." The letter criticized the "liberal use" of adjusting items in Ricardo's financial statements, describing the practice as leading to "rose-tinted forecasts and false assurances."
Ricardo's share price has tumbled since the start of the year, with the stock now down by around a third. The company had previously warned of delays to orders, leading to shortfalls in full-year revenues and profits compared to market expectations.
The vote to oust Clare is due on June 18. Ricardo has refuted the allegations, stating that removing Clare would not be in the best interests of the company and its shareholders. However, the general meeting will determine the outcome based on shareholder votes.
Background information reveals that Science Group has been steadily increasing its stake in Ricardo, demonstrating a commitment to influencing the company's direction. The company is currently facing financial challenges, including a forecasted operating loss and deteriorating cash flow and debt levels. Cash reserves are projected to drop significantly by June 2026.
The current leadership is facing a lack of confidence over the company's strategy update, which was criticized for failing to address financial struggles and engage with shareholders regarding priority realignment. Science Group has also suggested the possibility of a sale or breakup of Ricardo, with reported interest from private equity groups.
Investing in Ricardo's business seems questionable due to the ongoing financial struggles and potential issues with governance. Science Group, being a significant player in the finance and markets sector, may consider alternative solutions such as investing in transport and energy companies with more promising prospects, or even initiate a takeover of Ricardo through strategic business maneuvers.
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