Key Summary: In Aug 2023, Tarsadia Investments & Twelve Holdings (7.4%) express concerns about Cue's financial decline & strategic direction. On Feb 16, 2024, they reached Cooperation agreement with board.Market Cap: $38 million| Cue Health Inc., a healthcare technology company, designs and develops diagnostic platform for diagnostic tests for individuals, enterprises, healthcare providers and payors, and public health agencies.
Background
On August 31, 2023, the Tarsadia Investments and Twelve Holdings formed a group (together 7.4%) and issued a press release containing a letter to the Board. In the letter, Tarsadia Investments expressed grave concerns about the company's financial decline and strategic direction. Tarsadia, which invested in Cue since its Series B round in April 2018, noted that Cue's stock price has plummeted by 97% since its IPO, and its quarterly revenues have similarly fallen. Additionally, Tarsadia cited a prediction by Morgan Stanley that Cue would need to raise $75 million in Q4 2023, resulting in over 50% dilution for existing shareholders. Tarsadia had previously communicated these concerns to Cue's board but claimed no concrete actions had been taken.To address these issues, Tarsadia recommended the board take immediate actions: (i) Conduct a strategic review of the current business plan, (ii) Realign Cue's cost structure to achieve $50 million in annualized cost savings, and (iii) Appoint independent stockholder representatives to the board.
On September 18, 2023, Tarsadia Investments and Twelve Holdings increased their stake to 14.3%
Update
On February 16, 2024, the Tarsadia Investments and Twelve Holdings entered into a cooperation agreement with the company and pursuant to it, the company has agreed to increase the size of the Board and appoint Mr. Reddy as a Class I director, effective immediately, with a term expiring at the 2025 AGM. Concurrent with his appointment to the Board, Mr. Reddy was appointed to serve on the Nominating and Corporate Governance Committee of the Board. The Company will cooperate in good faith with the shareholder group to mutually agree upon an additional individual to serve as an independent director on the Board. Source
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