Coliseum Files Lawsuit Asserting Bad Faith by Committee of Purple Board

February 22, 2023  by HFBusiness Staff in Business Strategy, Industry   

According to Coliseum’s lawsuit, the preferred stock was issued without the approval of Purple’s stockholders and in direct response to Coliseum’s nomination of directors to the Purple Board of Directors. This violates Purple’s charter, fundamentally transforming the "one share, one vote" structure used to elect the Company’s directors to a cumulative voting regime that prevents holders of a majority of the common stock from electing or removing the full board.

Coliseum asserts that this is a bad faith attempt by the Special Committee of Purple’s Board to entrench itself and thwart shareholder democracy. Specifically, the preferred stock issuance violates those provisions of the Company’s charter that limit the form of stock distributions to holders of the Company’s Class A shares to additional shares of Class A common stock.

Adam Gray, Managing Partner of Coliseum, said, "The Purple Special Committee’s brazen action – taken no more than 24 hours after Coliseum proposed five highly qualified candidates for election – demonstrates the lengths to which the incumbent non-executive directors will go to preserve their Board seats at the expense of stockholders.”

“To seek such Board security amidst a contested election – and leveraging corporate machinations and stockholder resources to do so – is further evidence that Board change is warranted.”

“While Coliseum has sought to work constructively with the Purple Board – consistent with the collaborative investment approach we have executed successfully for the past 15-plus years – we have been left with no choice but to take the extraordinary step of a proxy contest and filing litigation seeking to ensure the election of directors is conducted in a fair and democratic manner for the benefit of all Purple stockholders."

In its lawsuit, Coliseum asks the court to declare, among other items, that:

- The named non-executive director defendants breached their fiduciary duties;

- Purple and the non-executive director defendants violated the Company’s charter;

- The preferred stock issuance is invalid, unenforceable, and void; and

- Coliseum’s nomination notice is valid.

Mr. Gray continued, "As a longstanding stockholder of Purple and a continued provider of much-needed capital to the Company throughout its time as a public company, Coliseum believes in Purple’s tremendous potential and the ability of Purple’s management team to steer the Company toward success.”

“That said, we also strongly believe that Purple stockholders deserve a highly credentialed, nimbler, more engaged and aligned Board that will not only support management, but also protect and restore stockholder value.”

"Coliseum’s nominees have the ownership mentality as well as the right mix of operational, financial, and restructuring skill sets urgently needed to help management execute on its strategic priorities. If elected, they will bring the collaborative attitude and fresh perspectives required to reverse years of persistent underperformance and maximize value for all Purple stockholders."

Additional information regarding Coliseum’s five nominees, including its Feb. 13 letter to stockholders, can be found here.