0000921895-19-002700.txt : 20191112 0000921895-19-002700.hdr.sgml : 20191112 20191112090438 ACCESSION NUMBER: 0000921895-19-002700 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20191112 DATE AS OF CHANGE: 20191112 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: e.l.f. Beauty, Inc. CENTRAL INDEX KEY: 0001600033 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 464464131 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-89846 FILM NUMBER: 191206493 BUSINESS ADDRESS: STREET 1: 570 10TH STREET CITY: OAKLAND STATE: CA ZIP: 94607 BUSINESS PHONE: (510) 778-7787 MAIL ADDRESS: STREET 1: 570 10TH STREET CITY: OAKLAND STATE: CA ZIP: 94607 FORMER COMPANY: FORMER CONFORMED NAME: J.A. Cosmetics Holdings, Inc. DATE OF NAME CHANGE: 20140212 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Marathon Partners Equity Management, LLC CENTRAL INDEX KEY: 0001353311 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: ONE GRAND CENTRAL PLACE STREET 2: 60 EAST 42ND STREET, SUITE 2306 CITY: NEW YORK STATE: NY ZIP: 10165 BUSINESS PHONE: 212-490-0399 MAIL ADDRESS: STREET 1: ONE GRAND CENTRAL PLACE STREET 2: 60 EAST 42ND STREET, SUITE 2306 CITY: NEW YORK STATE: NY ZIP: 10165 FORMER COMPANY: FORMER CONFORMED NAME: MARATHON PARTNERS EQUITY MANAGEMENT, LLC DATE OF NAME CHANGE: 20140513 FORMER COMPANY: FORMER CONFORMED NAME: CIBELLI CAPITAL MANAGEMENT LLC DATE OF NAME CHANGE: 20060405 FORMER COMPANY: FORMER CONFORMED NAME: Cibelli Capital Management LLC DATE OF NAME CHANGE: 20060214 SC 13D/A 1 sc13da508009006_11122019.htm AMENDMENT NO. 5 TO THE SCHEDULE 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

§ 240.13d-2(a)

(Amendment No. 5)1

e.l.f. Beauty, Inc.

(Name of Issuer)

Common Stock, $0.01 par value

(Title of Class of Securities)

26856L103

(CUSIP Number)

MARIO D. CIBELLI

C/O Marathon Partners Equity Management, LLC

One Grand Central Place

60 East 42nd Street, Suite 2306

New York, New York 10165

(212) 490-0399

 

ANDREW FREEDMAN, ESQ.

OLSHAN FROME WOLOSKY LLP

1325 Avenue of the Americas

New York, New York 10019

(212) 451-2300

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

 

November 8, 2019

(Date of Event Which Requires Filing of This Statement)

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ☒.

Note:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits.  See § 240.13d-7 for other parties to whom copies are to be sent.

 

 

 

1              The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

1

CUSIP NO. 26856L103

  1   NAME OF REPORTING PERSON  
         
        Marathon Partners L.P.  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        WC  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        NEW YORK  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         2,850,000  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          2,850,000  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        2,850,000  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        5.7%  
  14   TYPE OF REPORTING PERSON  
         
        PN  

  

2

CUSIP NO. 26856L103

  1   NAME OF REPORTING PERSON  
         
        Marathon Focus Fund L.P.  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        WC  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        DELAWARE  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         350,000  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          350,000  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        350,000  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        Less than 1%  
  14   TYPE OF REPORTING PERSON  
         
        PN  

  

3

CUSIP NO. 26856L103

 

  1   NAME OF REPORTING PERSON  
         
        Marathon Partners LUX Fund, L.P.  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        WC  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        DELAWARE  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         -0-  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         797,500  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          -0-  
    10   SHARED DISPOSITIVE POWER  
           
          797,500  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        797,500  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        1.6%  
  14   TYPE OF REPORTING PERSON  
         
        PN  

  

4

CUSIP NO. 26856L103

 

  1   NAME OF REPORTING PERSON  
         
        Cibelli Research & Management, LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        DELAWARE  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         -0-  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         1,147,500  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          -0-  
    10   SHARED DISPOSITIVE POWER  
           
          1,147,500  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        1,147,500  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        2.3%  
  14   TYPE OF REPORTING PERSON  
         
        OO  

  

5

CUSIP NO. 26856L103

 

  1   NAME OF REPORTING PERSON  
         
        Marathon Partners Equity Management, LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        DELAWARE  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         3,997,500  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          3,997,500  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        3,997,500  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        8.0%  
  14   TYPE OF REPORTING PERSON  
         
        IA  

  

6

CUSIP NO. 26856L103

 

  1   NAME OF REPORTING PERSON  
         
        Mario D. Cibelli  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        PF, AF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        USA  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         10,200  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         3,997,500  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          10,200  
    10   SHARED DISPOSITIVE POWER  
           
          3,997,500  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        4,007,700  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        8.0%  
  14   TYPE OF REPORTING PERSON  
         
        IN  

  

7

CUSIP NO. 26856L103

 

The following constitutes Amendment No. 5 to the Schedule 13D filed by the undersigned (the “Amendment No. 5”). This Amendment No. 5 amends the Schedule 13D as specifically set forth herein.

Item 3.Source and Amount of Funds or Other Consideration.

Item 3 is hereby amended and restated to read as follows:

The Shares purchased by each of Partners LP, Focus Fund and Lux Fund were purchased with working capital (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) in open market purchases. The aggregate purchase price of the 2,850,000 Shares beneficially owned by Partners LP is approximately $47,545,765, excluding brokerage commissions. The aggregate purchase price of the 350,000 Shares beneficially owned by Focus Fund is approximately $5,751,458, excluding brokerage commissions. The aggregate purchase price of the 797,500 Shares beneficially owned by Lux Fund is approximately $15,138,596, excluding brokerage commissions.

The Shares held in Mr. Cibelli’s personal accounts and in the accounts of his family members were purchased in the open market with personal funds. The aggregate purchase price of the 10,200 Shares held in Mr. Cibelli’s personal accounts and in the accounts of his family members is approximately $204,123, excluding brokerage commissions.

Item 4.Purpose of Transaction.

Item 4 is hereby amended to add the following:

On November 8, 2019, Marathon Partners sent an e-mail (the “Email”) to the Issuer’s Chairman and CEO, Mr. Tarang Amin (“Mr. Amin”), certain members of the Issuer’s board of directors (the “Board”) and senior executives at TPG Growth (“TPG”) regarding the Issuer’s operating performance and share price. Marathon stated its belief that it would be in the best interests of the Issuer’s shareholders to commence an auction process that seeks a sale of the Issuer to the highest bidder. Marathon further stated TPG’s underlying limited partners that are invested in the Issuer would also benefit from an auction process, especially given their continued liquidation of their shares.

In the Email, Marathon demonstrated in a table to Mr. Amin that the Issuer’s poor performance over time was not an opinion but historical fact. Marathon stated that increases in overhead and compensation had not allowed for profit growth over an extended period of time.

Marathon further expressed its belief that the Board did not have the luxury of ignoring the Issuer’s share price and the large discount to private market value. Marathon stated that given the Board’s fiduciary obligation to shareholders, it must weigh a sale of the Issuer versus any other strategies that Mr. Amin or other Board members may pursue to benefit shareholders.

Marathon stated that simple, inescapable math created a very high hurdle against any attempts by the Issuer to create more value by operating as an independent public company versus through an auction process. Due to the Issuer’s high operating and compensation costs, Marathon believes that a strategic acquirer of the brand could cut significant expenses and operate the business much more profitably than an independent company could reasonably expect to achieve.

8

CUSIP NO. 26856L103

Marathon also stated that it believed other public shareholders would agree with its logic that a sales process would deliver a significantly better risk-adjusted outcome for shareholders versus continuing to operate the business independently. Marathon went on to state that, while the Issuer’s management team was skilled, serious deficiencies existed with respect to the running of a public company successfully for the benefit of all shareholders. Marathon further stated that it did not believe that management had given enough to shareholders - profitable growth, aligned compensation programs and corporate governance improvements - to earn their patience or support for the acquisitions of other brands.

Marathon concluded the Email by stating its view that, irrespective of corporate governance shortfalls and other dynamics, the Issuer’s discount to private market value was too wide for the management team to overcome without a sale. Marathon therefore recommend that the Issuer explore strategic alternatives, with the goal of putting the e.l.f. brand in the hands of a new owner that could offer shareholders a significantly higher price than the current one.

Marathon intends to follow up on the Email with a formal letter to the Board outlining additional details and points in the coming weeks.

The foregoing description of the Email does not purport to be complete and is qualified in its entirety by reference to the full text of the Email, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 5.Interest in Securities of the Issuer.

Items 5(a)-(c) are hereby amended and restated to read as follows:

The aggregate percentage of Shares reported owned by each Reporting Person is based upon 49,999,358 Shares outstanding, which is the total number of Shares outstanding as of October 31, 2019, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2019.

A.Partners LP
(a)As of the close of business on November 8, 2019, Partners LP beneficially owned 2,850,000 Shares.

Percentage: Approximately 5.7%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 2,850,000
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 2,850,000

 

(c)The transactions in the Shares by Partners LP during the past sixty days are set forth in Schedule A and incorporated herein by reference.
B.Focus Fund
(a)As of the close of business on November 8, 2019, Focus Fund beneficially owned 350,000 Shares.

Percentage: Less than 1%

9

CUSIP NO. 26856L103

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 350,000
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 350,000

 

(c)The transactions in the Shares by Focus Fund during the past sixty days are set forth in Schedule A and incorporated herein by reference.
C.Lux Fund
(a)As of the close of business on November 8, 2019, Lux Fund beneficially owned 797,500 Shares.

Percentage: Approximately 1.6%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 797,500
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 797,500

 

(c)Lux Fund has not entered into any transactions in the Shares during the past sixty days.
D.Cibelli Research
(a)Cibelli Research, as the general partner of each of Focus Fund and Lux Fund, may be deemed the beneficial owner of the (i) 350,000 Shares owned by Focus Fund and (ii) 797,500 Shares owned by Lux Fund.

Percentage: Approximately 2.3%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 1,147,500
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 1,147,500

 

(c)Cibelli Research has not entered into any transactions in the Shares during the past sixty days. The transactions in the Shares on behalf of Focus Fund during the past sixty days are set forth in Schedule A and incorporated herein by reference.
E.Marathon Partners
(a)Marathon Partners, as the investment manager of each of Partners LP, Focus Fund and Lux Fund and the general partner of Partners LP, may be deemed the beneficial owner of the (i) 2,850,000 Shares owned by Partners LP; (ii) 350,000 Shares owned by Focus Fund and (iii) 797,500 Shares owned by Lux Fund.

Percentage: Approximately 8.0%

10

CUSIP NO. 26856L103

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 3,997,500
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 3,997,500
(c)

Marathon Partners has not entered into any transactions in the Shares during the past sixty days. The transactions in the Shares on behalf of each of Focus Fund and Partners LP during the past sixty days are set forth in Schedule A and incorporated herein by reference.

F.Mr. Cibelli
(a)As of the close of business on November 8, 2019, 10,200 Shares were held in Mr. Cibelli’s personal accounts and in the accounts of his family members. Mr. Cibelli, as the managing member of each of Cibelli Research and Marathon Partners, may be deemed the beneficial owner of the (i) 2,850,000 Shares owned by Partners LP; (ii) 350,000 Shares owned by Focus Fund and (iii) 797,500 Shares owned by Lux Fund.

Percentage: Approximately 8.0%

(b)1. Sole power to vote or direct vote: 10,200
2. Shared power to vote or direct vote: 3,997,500
3. Sole power to dispose or direct the disposition: 10,200
4. Shared power to dispose or direct the disposition: 3,997,500
(c)Mr. Cibelli has not entered into any transactions in the Shares during the past sixty days. The transactions in the Shares on behalf of each of Focus Fund and Partners LP during the past sixty days are set forth in Schedule A and incorporated herein by reference.

Each Reporting Person disclaims beneficial ownership of such Shares except to the extent of his or its pecuniary interest therein.

Item 7.Material to be Filed as Exhibits.

Item 7 is hereby amended to add the following exhibit:

99.1E-Mail to the Board, dated November 8, 2019.

 

11

CUSIP NO. 26856L103

SIGNATURES

After reasonable inquiry and to the best of his knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: November 12, 2019

  Marathon Partners L.P
   
  By:

Marathon Partners Equity

Management, LLC, its General Partner

   
  By: /s/ Mario D. Cibelli
    Name: Mario D. Cibelli
    Title: Managing Member

 

  Marathon Focus Fund L.P.
   
  By:

Cibelli Research & Management, LLC,

its General Partner

     
  By: /s/ Mario D. Cibelli
    Name: Mario D. Cibelli
    Title: Managing Member

 

  Marathon Partners LUX Fund, L.P.
   
  By:

Cibelli Research & Management, LLC,

its General Partner

     
  By: /s/ Mario D. Cibelli
    Name: Mario D. Cibelli
    Title: Managing Member

 

  Cibelli Research & Management, LLC
   
  By: /s/ Mario D. Cibelli
    Name: Mario D. Cibelli
    Title: Managing Member

 

  Marathon Partners Equity Management, LLC
   
  By: /s/ Mario D. Cibelli
    Name: Mario D. Cibelli
    Title: Managing Member

 

 

/s/ Mario D. Cibelli

  MARIO D. CIBELLI

 

12

CUSIP NO. 26856L103

SCHEDULE A

Transaction in the Shares of the Issuer During the Past Sixty Days

Nature of the Transaction

Securities

Purchased/(Sold)

Price Per

Share($)

Date of

Purchase / Sale

 

Marathon Partners l.p.

 

Sale of Common Stock (25,000) 18.0591 10/04/2019
Sale of Common Stock (25,000) 18.0876 10/07/2019
Sale of Common Stock (12,500) 17.2533 10/11/2019
Sale of Common Stock (12,500) 17.1998 10/22/2019
Sale of Common Stock (12,500) 16.6484 10/23/2019
Sale of Common Stock (12,500) 17.0157 10/28/2019
Sale of Common Stock (12,500) 17.7518 10/29/2019
Sale of Common Stock (12,500) 17.0631 11/01/2019
Sale of Common Stock (12,500) 17.9196 11/04/2019
Sale of Common Stock (58,000) 18.5322 11/07/2019
Sale of Common Stock (29,500) 17.1304 11/08/2019

 

Marathon Focus Fund L.P.

 

Purchase of Common Stock 5,000 15.8697 09/17/2019
Sale of Common Stock (2,500) 18.0591 10/04/2019
Sale of Common Stock (2,500) 18.0876 10/07/2019
Sale of Common Stock (2,500) 17.2533 10/11/2019
Sale of Common Stock (500) 17.1998 10/22/2019
Sale of Common Stock (500) 17.0157 10/28/2019
Sale of Common Stock (1,500) 17.7518 10/29/2019
Sale of Common Stock (2,500) 17.0631 11/01/2019
Sale of Common Stock (2,500) 17.9196 11/04/2019
Sale of Common Stock (5,800) 18.5322 11/07/2019
Sale of Common Stock (4,200) 17.1304 11/08/2019

EX-99.1 2 ex991to13da508009006_111219.htm EMAIL, DATED NOVEMBER 8, 2019

Exhibit 99.1

 

From: Mario Cibelli 
Date: November 8, 2019 at 10:01:18 PM EST
To: Tarang P. Amin

Tarang,

 

Thank you for your time on the earnings follow-up call yesterday.

 

I wanted to clarify one point we discussed. When I mentioned that e.l.f. had not made much progress for public investors over an extended period of time you responded that this was my “opinion”. My statement was fact, not opinion, as the numbers below demonstrate.

 

 

As you can see, not only has adjusted EBITDA stagnated, but e.l.f’s earnings quality (the percentage of adjusted EBITDA sourced from GAAP operating income + acquired intangible amortization) has also declined. This has been a very poor result for the public shareholders of the company. If e.l.f. achieves adjusted EBITDA in the mid $60 million range for fiscal 2021 then that would be an even longer period of flat results.

 

You and the board do not have the luxury of ignoring the share price and the company’s large discount to private market value. Given the wide discount, a sale of the company would be the most attractive outcome for shareholders at this time. As part of your fiduciary obligation to shareholders, you and the other board members must weigh transactions, including a sale of the company, that would produce a compelling price in the near term versus any other strategy you may be inclined to pursue, including strategic extensions or acquisitions.

 

Simple, inescapable math makes for a very high hurdle in any argument for e.l.f. remaining independent given the high levels of SG&A and compensation that have prevented profit growth. Strategic buyers of the company will be able to cut significant costs from the organization to drive much more profit growth and value from the brand versus an independent e.l.f.

 

 

 

I am confident that many e.l.f. shareholders would be supportive of a sale of the company at this time. Control shareholder TPG has clearly signaled its intention to exit its position and its underlying investors would surely benefit from a formal sales process.

 

It’s clear e.l.f. has a skilled management team, but there are serious deficiencies when it comes to running a public company successfully for the benefit of all owners. I do not believe that management has given enough to shareholders - profitable growth, aligned compensation programs and corporate governance improvements - to earn their patience or support for acquisitions of other brands.

 

Irrespective of corporate governance shortfalls and other dynamics, e.l.f.’s discount to private market value is simply too wide for the management team to overcome without a sale. It is time to explore strategic alternatives with the goal of putting the valuable e.l.f. brand in the hands of a new owner that can offer shareholders a significantly higher price than the current one.

 

-mario

___________________

Mario Cibelli

Marathon Partners Equity Management, LLC

212-490-4400

 

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