The activist investor Privet Fund on Wednesday nominated four people to the board at Potbelly, promising an activist spring for a company that has largely struggled to generate investor enthusiasm since its 2013 initial public offering.
Privet, which is pushing Potbelly to explore a potential sale of the company, nominated Bill Mitchell, former president of Dunkin’ Brands International, as well as D. Michael Steuert, CFO of the engineering firm Fluor Corp. The firm also nominated its portfolio manager, Ryan Levenson, as well as partner Ben Rosenzweig.
The proxy fight promises to intensify pressure on Potbelly as it makes key decisions about the future of the Chicago-based sandwich chain.
“Potbelly is a fantastic concept with tremendous potential. Unfortunately, numerous strategic missteps have eroded the brand, resulting in deteriorating operating metrics and a prolonged period of shareholder value destruction,” Levenson said in a statement. He said the board “has failed to take meaningful action to articulate or implement any type of thoughtful corrective strategy while the company continues to underperform its peers.”
Potbelly went public in 2013, doubled on its first day and then fell steadily into the low to mid-teens, where its stock has languished ever since. Much of that decline has been due to weak same-store sales, including a decline of 4.8% in the third quarter ended Sept. 24.
The company said last year it would conduct a strategic review, which frequently means it would explore a sale.
Privet, which revealed a 5.2% position in the company in November, has been agitating for change, along with other activist investors who are pressuring the company to sell. Multiple private-equity groups are said to be interested in making a play for Potbelly.
Privet Fund previously criticized Potbelly’s hiring of Alan Johnson as CEO, saying the hiring should not have come as the company was conducting a strategic review. There were hints at the time that Privet would consider a proxy fight to get membership on the sandwich chain’s board.
“While we understand that the company is undergoing a strategic review and shareholders are awaiting the results of that process, we continue to believe that the Potbelly board lacks accountability for the decline in both financial results and shareholder value that has occurred under its watch,” Levenson said.
Potbelly stock rose slightly in after-hours trading Wednesday.
The proxy comes just months after Potbelly agreed to appoint Joseph Boehm to its board in a settlement with another activist, Ancora Advisors, where Boehm is portfolio manager.