Blucora Shareholders Shoot Down Activist’s Bid for Board Seats
A dissident investor engaged since mid-March in a public proxy battle with Blucora Inc. saw its bid for four seats on the company’s board fizzle out after shareholders voted Wednesday to maintain the status quo.
Ancora Holdings, the Cleveland, Ohio-based parent of four registered investment advisory firms, had sought to install a slate of newcomers who would push to divest Blucora’s tax software business and focus the firm more squarely on wealth management. Ancora had purchased roughly 3.4% of Blucora’s outstanding shares since November.
Ancora said in a statement it was “disappointed” with the outcome but that it would remain “an engaged stockholder” in the company.
“We urge the Board of Directors to reflect on the pressing issues at hand and objectively assess all paths to unlocking value,” the statement said, adding that Blucora’s directors should “thoroughly evaluate any bonafide offers for the company (in whole or its parts).”
Blucora throughout the proxy fight–a rare occurrence in the indie brokerage space–told shareholders that its directors were better qualified to lead the company and that changes they made were already paying off. In a separate statement after Wednesday’s vote, it acknowledged it has “substantially more work to do.”
“[W]e appreciate the recognition from our stockholders that Blucora is a profoundly different and stronger company than it was just a year ago,” Blucora added.
Blucora’s board includes chair Georganne Proctor, former chief financial officer of TIAA-CREF, and Chris Walters, president and CEO of Blucora, who took over after former CEO John Clendening left in January 2020 over “differences in views” on the scope of his authority. Walters, a former digital media executive, has been a Blucora board director since 2014.
Ancora, which had nominated its CEO Fred DiSanto and three others, took aim at the board in an open letter March 17 to Avantax’ more than 3,500 independent contractors. It argued that the current management team at Blucora failed to find synergies between Avantax–its roll-up of tax-focused broker-dealers that includes HD Vest and 1st Global–and its professional tax software business, TaxAct.
DiSanto, in an interview last month, said it was past time to sell TaxAct, which Blucora acquired in 2012.
“There are no synergies between TaxAct and Avantax, and so the company’s trading at a deep discount,” said DiSanto, who has run Ancora since 2006 after managing Fifth Third Bank’s Investment Advisors Division.
He said he would use proceeds from selling TaxAct to pay down debt, repurchase shares and further invest in Blucora’s wealth management sector, where he said there was potential for stronger growth.
DiSanto and Ancora claimed mismanagement was alienating Avantax’ advisors, with increased fees and decreased service levels, sending many fleeing for other broker-dealers. By their calculation, advisor headcount at Blucora had tumbled by more than 700 between 2016 and the end of 2020 to 3,770, including a net loss of 100 advisors over the previous 12 months, although a Blucora spokesperson declined to comment on the accuracy of the figures.
Blucora called Ancora’s strategy “deeply flawed.” The company added four new directors of its own to the board since last March, as part of its effort to expand its tax-centric model.
“We believe Blucora is on the right path to creating long-term value for all stockholders,” the directors wrote in a March 15 letter to shareholders. Shares in the company had appreciated more than 70% over the previous six months, they noted.
The directors also objected to Ancora’s plan to sell the TaxAct software unit, saying the Covid-19 pandemic only temporarily hurt the value of the business. “Blucora’s tax preparation business has significant performance upside for which we would not get credit in a sale at this time,” the board wrote.
Blucora, then known as Infospace, went public in 1998 at $31.25 a share, hit a 52-week low at $8.37 last October and had been trading around $17.50 at the time the proxy battle became public. Shares were down more than 2% at $15.28 as of midday Thursday.