180 Degree Capital - Q4 2022
February 28, 2023
Transcript
Daniel Wolfe (President and Portfolio Manager)
Good morning, welcome to 180 Degree Capital Corp's Fourth Quarter 2022 Financial Results Update Call. This is Daniel Wolfe, President and Portfolio Manager of 180 Degree Capital. Kevin Rendino, our Chief Executive Officer and Portfolio Manager, I would like to welcome you to our call this morning. All participants are currently in a listen-only mode. Following our prepared remarks, we will open the line to questions. If you would like to ask a question, please press star six on your phone or click the Ask a Question icon if you are participating via your computer. I would like to remind participants that this call is being recorded, and that we're referring to a slide deck that we have posted on our investor relations website at ir.180degreecapital.com under Financial Results.
Please turn to our safe harbor statement on slide two. This presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward-looking statements are intended to be made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed herein.
Please see the company's filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the company's business that could affect the company's actual results. Except as otherwise required by federal securities laws, 180 Degree Capital Corp. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. I would now like to turn the call over to Kevin.
Kevin Rendino (CEO and Portfolio Manager)
Thanks, Daniel. Good morning, everyone. After five years of consistent outperformance, 2022 was a difficult year for 180. On slide three, we show a summary. The fourth quarter was challenging for the entire company when taking into consideration the entire portfolio, specifically the legacy private portfolio that came from Harris & Harris, our predecessor company. December itself was challenging for the public portfolio, given the frenzied tax law selling of many of our holdings. Our NAV declined to $6.32. 71% of that decline was due to the private portfolio, which, as many of you know, we simply have had no control over. That was led by Quantum and AgBiome. The balance was due to a decline in the value of our public holdings, namely Synchronoss, Arena Group, Comscore, Ascent, and Parabellum. We'll have more on those later.
Let's turn to slide four, which may be the most important slide in the deck, and I'm gonna be blunt here. While the month, fourth quarter, and year were disappointing to me, let's understand where we are as we start 2023. The sins of Harris & Harris are almost done, if not totally done, hindering the 180 shareholder. We've undergone, over the last five years, before last year, a slow and methodical business transformation. We have mitigated the dampening effects of Harris & Harris portfolio by generating nearly $3.50 of gains in our public portfolio since we started. While it's almost unconscionable that the private portfolio in a bull market has had $1.80 of losses through the end of last year, it is what it is.
It's over, as of February 24th, we now have a total of nine and a half million dollars in private holdings, it's really $7 million if you remove the TARA milestone payment, which in and of itself is about two and a half million. The private portfolio now is less than 10% of our NAV. When 180 started, I said it was our goal to have 100% of the assets in public-related assets for transparency purposes. We are now 90% of the way there. Six and a half million dollars ex TARA is the remaining value of our private portfolio, given the write-downs that we took in the fourth quarter to sort of clear the decks as we think through the next five years.
Slide five is a different version chart to show you how far we have come in remaking the business. We finally have a balance sheet where we control over 90% of the assets, you can see here. Our year in 2023 was disappointing as it related to the public holdings, and we own that. Unlike the last six years, it will be nice to have our performance in the future dictated solely from our strategy of picking public microcap stocks without having to fight the massive headwind of a private portfolio that not only didn't carry its weight in the last six years, but actually hurt us.
To show you how linked our future now is to our core competency of picking public stocks, let's look at the impact our public portfolio has had on our NAV in 2023, keeping the private portfolio stagnant. Year to date, our book value has climbed, as of February 24th, to $7.08 on the back of a 14.8% gain in our public portfolio. Our NAV would now be up 12%. If this was the case when we started in 2017, a 14% increase in our public stock picking would have had just a 2.9% increase in our NAV. You can see now how our NAV growth is more directly linked to our public stocks rather than having an esoteric private portfolio impact it.
It's easier, we think, for shareholders to judge how we're doing, and we'll be much more transparent in the next five years than we were even in the last five. We're finally changed the company the way we always wanted to when we first started. Slipping, skipping ahead to slide six, you can see the dip in our cash and public securities here. It was indeed a rough quarter for our stock picking, with a 7.6% decline versus a similar increase for the Russell Microcap Index. I'd encourage everyone to read our shareholder letter, where we take a deep dive into the markets, our holdings, and all the rest. We review 2022, and we provide insight into 2023.
We struggled last year amidst a risk-off environment with the Russian war with Ukraine, subsequent higher rates to combat inflation due to a messy supply chain, which was caused by COVID. We were wrong in thinking that our holdings would perform better, given their low valuations to start, and for the most part, good fundamentals, except for the case of Quantum. We were wrong. The messier the capital structure, the more investors couldn't wait to sell, which is one reason why names like Synchronoss and Arena underperformed, not only in most of 2022, but certainly in the fourth quarter. The fourth quarter came, especially December, I haven't seen tax law selling like that in a very long time. Unfortunately, we were the recipients of it.
It wasn't enough that Synchronoss got cut in half during the course of the year, it got cut in half in one month in December as tax law selling was rampant. With 2022 in the rear view and our sights on 2023, being here now, being Pollyannish isn't part of our thinking as we acknowledge that rates are materially higher than they were just 12 months ago. This increase will no doubt have a dampening effect on global growth rates as well as equity valuations. Here's a nutshell of our views, which we'll support in our shareholder letter from a number of charts and research, if you happen to read the letter. One, our overall view is inflation peaked and the multitude of Fed rate hikes has already had a significant effect in lowering inflation.
Two, we believe we are already in some sort of recession given real GDP has declined for more than two quarters in a row already. Three, we do not believe we are headed for a financial Armageddon like we had in 2008. In 2008, we had $1.3 trillion of subprime mortgage assets on the balance sheets of banks and insurance companies. That financial leverage simply doesn't exist like it did in the past. We believe stock price valuations have significantly discounted dire economic outlooks that are not occurring currently, and in fact, may never occur. We believe we are headed to a normal environment where the market can no longer rely on free money, and quantitative easing and 0% interest rates. Stocks will have competition from the bond market, and we do expect multiples at a whole to contract.
Bubbles will continue to be popped, slower growth rates will inevitably occur, and companies with real revenues and real cash flow can still prosper. For the time being, we believe rightly so, gone are the gold rush days when talking heads, financial fees, and children pontificate endlessly on how things have changed and how we are in a new world order with these individuals arguing for an entirely new investment landscape. We think a back to the basics scenario where companies are being judged based on real cash flow and real revenues will come to exist and be more important in the next five years than it was in the last five years. Slide seven shows our quarterly performance for every time frame. Obviously, we didn't get the job done in 2022. We were down every quarter.
The calendar turned on January 1st, and our 14.9% performance to start the year, doubles that of the benchmark. We're off to a good start, but it is what it is, nothing but a start, and we know how quickly things can change. At least I'm sitting here today, I'm happy that we're up 14.8% instead of down 14.8%. Like we actually were in the first quarter of last year, as you can see from that chart. On slide eight, here are the sources and changes for our assets in Q4. As you can see, $1.27 or 71% of the decline came from our legacy portfolio. Slide nine shows our 22 year-to-date numbers. Not pretty.
Our public performance, if left alone, was not competitive, but if left alone, would have caused our NAV to drop only 28% versus where it ended up at the end of the year. Layer on more than $1 of losses in the private portfolio for the year, and you get what was a very difficult year. As you can see on slide 10, obviously, while last quarter and last year were substandard, we've enjoyed significant outperformance from our public holdings. While it would have been nice to get some help from our private portfolio, it hurt us to the tune of $1.80 per share. The good news, and I really cannot emphasize this enough, our private portfolio is now valued at roughly $0.65 per share, rather than comprised of over $5 a share of NAV just six years ago.
Slide 11, the performance of every stock we owned in Q4. You can see Arena Group, Synchronoss, Ascent, Parabellum, and Comscore led the way with significant declines. To say a few words about each of our holdings that stood out in the past quarter, please turn to slide 12. On December 13th, 2022, Arena announced the acquisition of Men's Journal using a new debt facility from B. Riley to fund the acquisition. The facility was meant to be a bridge to completion of an equity or other type of financing, as it has terms that include increases in the interest rate, quarterly starting in March of 2023. With that lack of transparency and confusion, unfortunately, Arena stock subsequently collapsed from approximately $16-$10.61 at the end of the quarter. As it turns out, we like the transaction.
It was the funding piece that was a little bothersome to The Street. Comscore continued to improve to show improved financial results for Q3 and announced the negotiation of a data deal with Charter to provide lower costs, increased data access, and a longer-term form of exclusivity with regards to the agreement. That said, the stock was unable to recover from the collapse that started earlier in the year, due primarily to continued ambiguity. I can never say the word. Around the potential for the special dividend to be called by the preferred stockholders and other concerning corporate governance matters. Service did continue buying common stock in the open market with large purchases of 1.5 million shares at $1.10. The company does report tonight. We truly believe in the business.
We are on the cusp of ramping up our activism. If in fact, we don't see improvements from the corporate governance from the board of directors that we intend to see when they report their results tonight. In terms of we did have a couple of names that help. Potbelly continued to provide strong results across all financial and shop-level metrics. They also provided a strong guide for Q4 and announced the signing of four additional shop development deals with existing franchises. Commercial Vehicle Group was up in the quarter. They continued to show the improvements made by management through re-negotiation of contracts and the streamlining of their business. They reported new business wins, continued strong free cash flow that allowed the company to pay down debt near the top end of the guidance.
Alta Group reported results that exceeded all analyst expectations and guidance with continued strong performance across all of its business. The company also notes that it continues to be constrained on its rental fleet and has not seen any weakness in demand at all. The next set of slides, starting on slide 15, show our performance for calendar 2022, which tells the picture of each of our holdings. We also include on slide 16, as we do every quarter, a snapshot of each of our holdings since the day we started. Clearly, while 2022 was an underperforming year, the six years we have been at this have yielded significant outperformance, all of which leads to slide 21. The complete look at what we have done.
I'd say last year knocked out three numbers down, three-year numbers down, but it did very little to our five-year performance numbers and our inception numbers. Fortunately, this year is off to a better start, so we hope to be able to report a much different picture than this chart would dictate, depict when we visit with you after Q1 of this year. Finally, to reiterate, we've undergone a significant business transformation that is essentially complete, albeit not necessarily the way we would have wanted the last piece to fall by taking write-downs in AgBiome and Quantum. Remember, between Daniel and I, we own 8% of TURN. Our full team, including the board, owns 10% of the company.
We're economically aligned with our shareholder. Nobody feels the pain of 2022 more than we do. It is also over. As we begin 2023 and the next five years, I'm thankful I don't have to stare at many of the private holdings as we did when we first started. Instead of having $50 million of private holdings to worry about and which we couldn't control, we were essentially down to $6.5 million. The decks are cleared and our performance now will be dictated by our primary focus of picking small micro-cap stocks with a Graham and Dodd focus and an activist bent. Daniel, why don't I turn it over to you now?
Daniel Wolfe (President and Portfolio Manager)
Thank you, Kevin. As Kevin just mentioned, our business transformation really is almost complete. If you turn to slide 22, I'm really looking forward to the day when we actually no longer have this slide as part of our shareholder update call. This quarter, we wrote down the value of our holdings in AgBiome due primarily to declines in the value of public comparable companies. Tailed Out Life has been written down to zero following its management's continued endless failure to raise capital. Following these write-downs, 180's remaining private portfolio has only one material position, which is AgBiome. The total assets of the remaining portfolio, as Kevin said, is approximately $9.5 million.
Of that, $2.4 million are payments we expect to receive from the sale of TARA to Valo Health, with $1.1 million to be paid in April 2023 and $1.3 million in April 2024. The remaining legacy companies make up approximately 1.5% of our net assets as of December 2022, and less as of today with the appreciation in our public holdings. There really isn't anything else worth discussing relating to these assets, so I'm gonna move on. Please turn to slide 23. For Q4 2022, our regular operating expenses equaled approximately $800,000 versus approximately $750,000 in Q4 2021. The main increase year-over-year relates to admin and operating expenses, which include our marketing efforts that I'll discuss in detail on the next slide.
We'll maintain a lean cost structure outside of fixed expenses for being a public company, focusing on our expenses on activities designed solely to enhance our investment performance or to increase our revenues from managing outside capital. As that has been the case since Kevin and I took over running 180, we have been consistent in saying that the management team will only participate in a bonus pool if our performance warrants it. Needless to say, our performance for 2022 didn't warrant a bonus pool and thus no performance-based bonuses are accrued at or paid as of the end of Q 2022.
In addition, no new bonus pools will be accrued until we overcome a high watermark set by our public holdings and payment of the historically deferred portion of a prior bonus pools will require the same with respect to each year that they were established. Our management team and board are acutely aware that we are in business to serve our shareholders. Please turn to slide 24. As I mentioned, some of the increase year-over-year expenses relates to our marketing efforts with Peak Strategies.
We showed you last quarter some of the efforts that we had, and as you can see on this slide, Peak has done a great job in getting us in front of leading financial journalists to help increase the exposure of TURN. We continue to pursue these opportunities with earnest. Please turn to slide 25 and 26. We provide these slides each quarter that enable our shareholders to look at the trend of our total expenses and compensation related to expenses as a percentage of net assets. This year, the percentages increased primarily because of the decline in net assets. We continue to anticipate the reductions in our operating expenses as a % of net assets will be based on growth in our net assets rather than further reductions in our expenses.
We remain committed to treating every dollar of shareholder money with the utmost care and consideration. Please turn to slide 27. Here we present our scorecard through Q4 of 2022 based on certain metrics that we track throughout the year. While 2022 was difficult, we believe we're well-positioned to grow value for our shareholders across all these metrics over time, as we have done during the prior five years of 180's existence. Please turn to slide 28. As of the end of Q4 2022, TURN traded at 84% of NAV. Our securities of publicly traded companies in cash and other assets, net of liabilities, were $5.41 per share. Stock price was $5.28.
If we receive 100% credit for the value of these assets, the market is ascribing a negative $0.13 per share or negative $1.35 million to our legacy private portfolio as of the end of the year. If you take and update this analysis through February 23rd, 2023, given the discussion earlier in this letter, using solely changes in value of level one or our publicly traded holdings or assets that are valued using level one, or publicly traded-based information, TURN traded approximately 75% of NAV. Our securities of publicly traded stock, cash, and other assets were about $6.16 per share. Our stock price was $5.28. If we receive 100% credit, similar analysis, the market is ascribing value approximately negative $0.89 per share or negative $9.22 million to our legacy private portfolio.
As Kevin mentioned earlier, I've talked about earlier, remind you that $2.4 million of this legacy private portfolio are payments from the sale of TARA to Valo Health, we expect to receive the first $1.1 million in April of 2023. We received the first $250,000 in December of 2022. Given how painful the market has been in 2022, we think the current construct of our balance sheet has provided really a true floor to our share price. While none of 2022 has been fun, had 2017 to 2021 not occurred, our share price would be nowhere near where it is trading today. Please turn to slide 29. I'd like to end with examining this discount to our stock trades at with respect to NAV in a little more detail.
The chart shows our stock price versus NAV over time, with the NAV that's being used in the denominator set at the prior quarter disclosed NAV. You notice that the most abrupt jumps or declines occur when the new end of quarter NAV is used in the calculation. As 180's assets are now comprised substantially of publicly traded investments, the NAV is much easier for shareholders to estimate, particularly relative to our share price. We also believe that it will be easier for us going forward to provide a closer look at our business at various points of the year outside of our normal reporting cycle.
While it is still very early in 2023, and the performance of the quarter and the full year may be materially different than as what we listed as of February 23rd, we're encouraged by the start of 2023 and thought it important to provide the interim update to shareholders and that we re-release separately from our normal earnings release. As you can see from this chart, our stock trading discount to NAV expanded during the due to growth in our NAV rather than declines in our stock price. Our belief in the increased ability to understand where our NAV is at a more frequent basis will aid in our continuing quest to narrow the discount between our stock price and NAV.
That said, we focus on what we control and can control, and that is increasing 180 Degree Capital Corp.'s NAV. If we are able to do that, the stock price should follow as it has in our six-year history for the benefit of shareholders. Speaking of that, we certainly do not believe TURN stock price reflects an appropriate value of 180. As you've seen us do in prior quarters and in similar situations, management looks forward to adding to our ownership of 180 in open windows for such purposes. We would now like to open the call for questions. If you have a question, please type star six on your phone or click the Ask a Question icon if you are participating via your computer. Give a minute for the queue to open.
Kevin Rendino (CEO and Portfolio Manager)
While we're waiting.
Daniel Wolfe (President and Portfolio Manager)
Our fir-
Kevin Rendino (CEO and Portfolio Manager)
See if I can say it.
Daniel Wolfe (President and Portfolio Manager)
There we go.
Kevin Rendino (CEO and Portfolio Manager)
Okay.
Daniel Wolfe (President and Portfolio Manager)
Our first question comes from Brian Alexic. Hey, Brian.
Kevin Rendino (CEO and Portfolio Manager)
Oh, boy.
Daniel Wolfe (President and Portfolio Manager)
Can we hear you, Brian?
Speaker 4
Can you hear me?
Daniel Wolfe (President and Portfolio Manager)
Yes. Now we can hear you, Brian.
Speaker 4
There we go. I guess I can turn off the mute. Question for you on the Parabellum. I read in your letter that there's a kinda capital raising deadline of now-ish for the pending acquisition and then the target can kinda decide what they wanna do. I'm just assuming, let's say that it doesn't work with them. I think you have roughly another eight or eight months or so to or Parabellum has another 8 months to find an acquisition target. Can you just say what would happen, you know, to the TURN balance sheet, you know, as you guys were the SPAC sponsor, if nothing happens and the SPAC gets redeemed, you know, how what's the read-through? How do we think about that scenario?
Daniel Wolfe (President and Portfolio Manager)
Thanks. Thanks for your question, Brian. Obviously I can't speak too much on Parabellum in the specifics relating to except for what is publicly known, as you mentioned, there is that ability. It's not a, it's not an automatic determination in terms of if the board of the target EnOcean wants to pursue different alternatives and terminate the business combination agreement. You know that and that deadline, you know, for having the capital commitments is today. There hasn't been anything announced publicly regarding that, I can't, again, can't speak in specifics. At the end of the day, this transaction does not go forward, from a technical perspective, the SPAC is able to extend its life through September.
To do that, the sponsors would have to put in approximately $185 per month, $185,000 per month. I, you know, I think that's a decision that would have to be made if EnOcean were to terminate the agreement or we were to terminate the agreement with EnOcean. If at the end of the day, under the scenario where the SPAC was shut down and the trust distributed, the result to TURN's balance sheet would be it would be a diminished amount of capital potentially coming back, depending on how much is left in the operating account at the end of the day. Right now we have it valued at about $2.7 million. You know, in a downside scenario, it would be, you know, approximately, a $0.27 impact to NAV.
Speaker 4
Got it.
Kevin Rendino (CEO and Portfolio Manager)
Sorry. What I would say there, Brian, hang on one second, is,
Speaker 4
Sure
Kevin Rendino (CEO and Portfolio Manager)
It's a good company in a very difficult market for everything, funding the debt markets, SPACs, raising capital. There's been a back and forth in terms of trying to find the right value for the business. It will either, there either be an agreement or there will not be. I wouldn't take it as if you don't see an announcement by the end of the day that it's over. You can always have extensions, and there's a give and take, always a back and forth between investors and the board. It's still a work in progress. We hope to be able to conclude on something, but as Daniel said, if we don't, this will have been a waste of time. It will and it will the waste of time will have been $2.7 million, as Daniel pointed out.
Speaker 4
Got it. If I could ask one more on D-Wave. Hard not to notice the volume on February 6th. Are you guys able to share anything about your position on D-Wave as of today?
Kevin Rendino (CEO and Portfolio Manager)
No. You know that. You, we can't share with you unless what our ownership stake of in a particular day, no.
Speaker 4
Okay.
Kevin Rendino (CEO and Portfolio Manager)
Can't do that.
Daniel Wolfe (President and Portfolio Manager)
Thanks, Brian. if you have a.
Kevin Rendino (CEO and Portfolio Manager)
Brian, I will say one other thing that Daniel.
Speaker 4
Oops, sorry. I hit the wrong button there. Go ahead.
Kevin Rendino (CEO and Portfolio Manager)
One other thing. You know, we've gotten a number of.
Daniel Wolfe (President and Portfolio Manager)
My apologies, everybody. I hit the wrong button getting out of Q&A. Sorry, Kevin, go ahead.
Kevin Rendino (CEO and Portfolio Manager)
We've heard this from shareholders. We're not an open-end fund, we will be able to, as Daniel said, more frequently provide information on where we are periodically during the course of the year. Because we now know what we own, and we can value what we own because they all trade on the Nasdaq and the New York and the rest. As it relates to specifically sharing with folks outside of form, you know, Schedule 13D or Schedule 13G filings, we can't and probably won't ever provide what we're doing in the middle of a quarter with regards to our position.
That just wouldn't make any sense. If we exited it and we were a filer, you'd probably see that. We don't we're not gonna get ourselves in a situation where we're showing our hand when we don't have to show our hand. That's kind of the professional answer, Brian, to your question. Okay, Daniel, go ahead.
Daniel Wolfe (President and Portfolio Manager)
Yeah. Sorry about that. Sorry, everybody. I think we're back on. Adam Waldo, please go ahead.
Adam Waldo (Chairman and Managing Member)
Hi. Good morning, Kevin and Daniel. Thanks very much for taking my questions. I hope you can hear me okay.
Daniel Wolfe (President and Portfolio Manager)
Yes, we can.
Adam Waldo (Chairman and Managing Member)
I apologize. I got on the call a little bit late. You may have covered this in your prepared remarks, but two topics, AgBiome write-down and Comscore activism. On AgBiome write-down, you know, is a bit of a sizable write-down obviously, and I wonder if you can provide a little more color on the factors that drove the size of that write-down, and then conversely, what factors you see going forward that might lead to a write-up, and then I'll follow up on Comscore.
Kevin Rendino (CEO and Portfolio Manager)
Daniel, let me attack AgBiome. If you have anything to add, go ahead. There's two reasons. When you do an analysis of any of our private holdings, the analysis encompasses a number of factors. It could be the last raise that the company did, but if you're outside of a raise, then you sort of have to look at the company profiles, and you do an options pricing methodology with regards to it. Clearly, 2022 was a difficult year for the ag space, and as such, as you're looking at AgBiome and they're a year removed from doing a deal, you have to value it differently than you did starting the year. Daniel, is there anything else there?
Daniel Wolfe (President and Portfolio Manager)
Nope. You phrase it right.
Kevin Rendino (CEO and Portfolio Manager)
Yeah. I don't know what to say. I mean, they need to run their business better. I mean, that's the best way for me to phrase it, Adam. It's... The whole frustrating part about all this stuff is I don't know. I can't control it. We have no say other than we speak to the board, we speak to the management team, but inevitably we can't control anything.
They got a lot of work to do to improve their business model. They have a board that would more than love for them to be public, but are they really ready to be public? I mean, that's all the question. It was a challenging year for the industry, and obviously, if you could see from our mark, it was a challenging year for AgBiome. That's really all we can say on it. In terms of Comscore[audio distortion].
Daniel Wolfe (President and Portfolio Manager)
Oh, sorry. Just on AgBiome, if I may.
Kevin Rendino (CEO and Portfolio Manager)
Yeah.
Adam Waldo (Chairman and Managing Member)
The bulk of the write down was operating performance driven. It wasn't discount rate because of the backup in interest rates and Fed funds and so forth. It was mainly operating performance for the company was the principal driver.
Daniel Wolfe (President and Portfolio Manager)
No, that's so.
Kevin Rendino (CEO and Portfolio Manager)
Multiple of comps also. Go ahead, Daniel, yeah.
Daniel Wolfe (President and Portfolio Manager)
The option pricing models do include, and it's actually not discount rate based. It's actually, when interest rates go up, the volatility and volatility also goes up, you can actually see, the option pricing models have an opposite impact. It really comes down to, as Kevin said, when you have a company that has that financing that's over a year out, you know, under ASC 820, which is the accounting standard for determining fair value, you need to incorporate other factors into the determination because there's been a long time since the, you know, that price and the valuation was set.
When you look at both the, you know, some of the inputs we had around the company, but mostly related to the performance of comparable related companies, you know, again, it was a pretty difficult year for most ag companies, especially small tech, small cap, as we know. That being incorporated into value and determination of value led to the, you know, made the significant decrease in value.
Adam Waldo (Chairman and Managing Member)
If I'm hearing you properly, gents, it's really more multiple compression in the comp set, rather than way off target operating performance of the business.
Daniel Wolfe (President and Portfolio Manager)
It's still a relatively early stage company, right? I mean-
Adam Waldo (Chairman and Managing Member)
Right. Okay.
Daniel Wolfe (President and Portfolio Manager)
They do have some products on the market. It's not, you know. You know, they're not the actual operating performance isn't out there, right. They do have some products that are on the market, but it's early stage. If you look at, you know, if you look at just the weather, right? You know, a lot of their stuff, they develop fungicides.
That's one of their main products that's on the market. For fungicides, you know, you need the, you need wet weather. If you look at just the weather from last year, it was difficult in some of the main growing areas. You know, there's... That's not to say that they don't have really interesting products and capabilities and there is the opportunity for, you know, growth into the future. You know, 2022 was a difficult year.
Kevin Rendino (CEO and Portfolio Manager)
Needless to say.
Adam Waldo (Chairman and Managing Member)
Sorry.
Kevin Rendino (CEO and Portfolio Manager)
Needless to say, as it relates to coming public, this market is not about idea stocks. We don't need billion-dollar ideas right now. We're in a risk off environment where that's sort of the last thing on investors' attention. Names like this just get pushed to the back of the line, if in fact there actually is a line. Obviously disappointing. We have a high regard, have had a high regard for the company, and it's just another reason why it's hard for me to ascertain how Harris & Harris existed for as long as it did with names like this. As Daniel said, it is early stage. You know how long we've owned it? Daniel, how long have we owned this?
Daniel Wolfe (President and Portfolio Manager)
AgBiome was 2014, if I remember correctly.
Kevin Rendino (CEO and Portfolio Manager)
That's nine years of early stage. D-Wave was funded. Yeah, I can't believe I'm saying this. Was it 1999?
Daniel Wolfe (President and Portfolio Manager)
It was. The D-Wave was founded in 1999. We invested in D-Wave in 2000. Actually, I take back what I said earlier about AgBiome. Our initial investment date in AgBiome was in 2013, and our initial investment in D-Wave, I believe was in 2006 or 2007.
Kevin Rendino (CEO and Portfolio Manager)
It's insane that the company existed for as long as it did. We inevitably would've ended up as a zero if it didn't change its stripes. On Comscore, Adam. It's a business that it's a real franchise. The board's done some good things. They hired John Carpenter. They've been buyers of their own stock in the open market. Board members, specifically, Service as well. Initiated a cost improvement program, which should help their EBITDA margins, investing in the right areas. They've done some good things. Here's where the issue is. Number one, it's a 10-person board, which is completely unwieldy and out of pocket for a company of this size. It's just too big. The compensation in 2021 was $4.1 million paid to the board.
Now, some of that was paid back from 2020. It's an unconscionable amount of capital. When I was on the board of a company, TheStreet, we didn't, we didn't get paid, I don't think. We took zero cash from the company because our economic incentive was a 17% ownership stake that we had in TheStreet. Some of the preferred holders, which have two seats each, are actually paying themselves as well. That bothers me. That needs to change. You have a lead independent director who's been there for 15 years, who hasn't added a day of value in the 15 years that he's been there, and he made $900,000 in 2021. That's disgraceful and egregious. They're not addressing the issue of the preferred where it is dominating the capital structure.
There's a special dividend out there which the company is entitled, which the preferred holders can call, except they can't call it because it would put the company at risk. The company doesn't necessarily acknowledge this. They don't really discuss it. They're in a weird spot because they can't say we can't pay it, on the one hand, except on the other hand, they can't pay it, and the special dividend is not gonna be called, but everyone thinks they're gonna call the special dividend. There's a number of things at the board level which need to be fixed and altered. There's more alignment that the preferred shareholders could make with the common shareholders to show that they are aligned with the common shareholders. We're gonna press.
We're gonna get more aggressive in some of our commentary if we don't see some significant changes. We're done talking about the things that we think they should be doing. We're gonna start demanding that they do certain things. If that means writing a public letter, then we'll write a public letter. I'm hopeful we don't have to do it, and the board will operate properly. They need to shrink the size of the board. They need to shrink the comp that's paid to the board. They need to deal with the special dividend, because you can't have a board that's paying themselves $4.1 million and then telling the CEO to go fire a bunch of people or hold people's comps, you know, at less than inflation. It just, it doesn't work.
The people that have been at a disadvantage here are the employees of Comscore. The board, it has a responsibility to not serve preferred shareholders. Their responsibility is to common shareholders, we're gonna make sure that they're aware of their responsibility. It's a completely egregiously mispriced business. Like $1.16 makes zero sense to me. Zero. It's worth 3x that amount now. The board's gotta basically deliver on enhanced corporate governance practices. They're just behind the eight-ball here. We'll see if they do it. Hopefully, they will.
Time will tell, but we're activists for a reason. We're never gonna be able to run a proxy contest. We're not gonna waste our shareholders' money by launching a proxy contest we can never win. We will, we'll make their lives a little more difficult by being very bold in letters written to common shareholders and the employees if they don't change their stripes. Long-winded answer.
Daniel Wolfe (President and Portfolio Manager)
And, and-
Kevin Rendino (CEO and Portfolio Manager)
That's our answer.
Daniel Wolfe (President and Portfolio Manager)
Maybe the only other thing I would add to that is, look, you know, we've had a good dialogue with them. They have done a number of things that we have suggested, and they have been somewhat responsive. It's really these remaining topics that we think, you know, if they actually focus on and work to resolve, that should unlock value for everyone.
Adam Waldo (Chairman and Managing Member)
Thank you for the helpful comments. Kevin, thanks for clarifying about a potential proxy contest. Obviously under Delaware corporate law, the board's obligation is to the common shareholders above the preferred. Could you envision some sort of contingency litigation around fiduciary duty here? What other forms might activism take beside letter writing?
Kevin Rendino (CEO and Portfolio Manager)
Yeah, proxy contest, probably not gonna do. The Delaware courts have been very emphatic about what the obligations are of board members. That is, they are there to facilitate the rights and represent the rights of common shareholders. They haven't really done anything to violate the rights. I mean, what have they done? There's nothing to sue them over yet. But we haven't... We're watching. You know, if they cross a line, then litigation is an open possibility. Like I said, to Daniel's point, we've had a good dialogue with the board. The dialogue has stopped being a dialogue because they're not addressing the certain things that need to be addressed. They've addressed a lot of other things.
They, they need to keep addressing the issues that are plaguing the stock. There's no reason, given the results, why this share price is $1.16. It was 3x the price in April of last year. 3x. Nothing's changed. As a matter of fact, the business is better. Immeasurably better. Way better. What happened last year, if you remember, is they because the preferred is not calculated as equity according to Russell, so they unfortunately ran through to the downside where the market cap levels were to remain in the Russell. We kept sending them notes. Convert some of your preferred, 'cause you convert it to common at some economic interest to you. We weren't asking them to lose economics here.
If you do that, your market cap will be higher because now because obviously common is calculated as equity, and you can retain your status in the Russell. They just completely ignored it. Ignored it. The stock went from three to basically $1.50 as a result of the Russell being kicked out of the Russell. We're not gonna allow them to disregard the things that are important to this equity price, which is dealing with the preferred, dealing with the special dividend, talking about it, being transparent about it.
They're just ignoring it. They're hoping it will go away. It's not gonna go away. The $1.15 proves it that it's not gonna go away, because we've had a rally in the market and the stock has done nothing. We're on it. Litigation potentially possible, no proxy contest, but public letters for sure. If that embarrasses certain members of the board, so be it. Clean up your act or you're gonna get a letter from a big shareholder. Thanks very much and, keep your chin up, guys. Thanks, Adam.
Daniel Wolfe (President and Portfolio Manager)
Thanks, Adam. Have a good year.
Operator (participant)
If you have a question, please press star six on your phone. I am not seeing any other questions in the queue.
Kevin Rendino (CEO and Portfolio Manager)
Look, thanks everyone. It's, it was a good five years and then a bad last year. There's no getting around that. I promised you full transparency when we got here. That means when it's good, it's bad, you're gonna get the same level of transparency. We don't hide behind bad performance. We had bad performance in our public portfolio last year for the first time since we arrived, and that was disappointing. While we also had hits in our private portfolio, which was completely disappointing, and not helpful in 2022. As I said, our business transformation is now 90% complete. $50 million worth of assets that we had in private holdings when we started is now down to $6.5 million.
As we stare down the next five or 10 years, our performance is going to be dictated by the public stock picking that we do here. That's gonna drive our NAV, unlike it has in the past five or six years, where the private portfolio still dominated. It was the great majority of our assets for more than half of the last six years. That's no longer the case. That's not to suggest we're gonna have outperformance. That's gonna take blood, sweat and tears and a lot of hard work. The good news for us is I no longer have to spend a ton of time worrying about which private portfolio may or may not hurt us this quarter.
We've had some wins in the private portfolio throughout HGL and Petram, but for the most part, as you can see in the slides, $1.80 in losses in the last six years has been nothing short of a tremendous headwind that no longer exists as we stare out the next five years. With added transparency should lead to a narrowing of the discount. Remember, at the end of the day, the more that we build scale, the more opportunities we'll have to return capital back to shareholders, whether that's share repurchase or dividends. If the discount never narrows, then we could always close it down and give all the money back to shareholders.
That's not for today's discussion, but as we think through the next five years, we do have a chance to make a lot of money here for our shareholders. We think the dislocation of the equity markets in 2022 is gonna serve us well as we look out the next three years. Thank you for your time today. We look forward to chatting with you about our Q1 results. If anybody has any questions, you know where to find us. Please email or call and we'll be happy to jump on the phone with you and discuss whatever it is that you wanna discuss. Thanks.
Operator (participant)
Thanks, everyone. You can now disconnect.