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    Lemelson Capital Wants To Toss Geospace Execs

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    The activist paints a grim picture of Geospace's management and performance.

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    Lemelson Capital Wants To Toss Geospace Execs

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    amvona
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    The activist paints a grim picture of Geospace's management and performance.

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    Lemelson Capital Wants to Toss Geospace Execs

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    The activist paints a grim picture of Geospace's management and performance.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    1K views3 pages

    Lemelson Capital Wants To Toss Geospace Execs

    Uploaded by

    amvona
    The activist paints a grim picture of Geospace's management and performance.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 3

    This copy is for your personal, non​

    ­commercial use only. To order reprints for distribution to your colleagues or clients please visit: 
    http://www.thedeal.com/reprints­permissions/ or call +1 212­321­5070.

    ACTIVISM

    Lemelson Capital Wants to Toss Geospace Execs


    The activist paints a grim picture of Geospace's management and performance.

    By Paul Springer

     Updated on May 18, 2018, 04:50 PM ET

    A feud is escalating between Geospace Technologies Corp. and activist investor Lemelson Capital Management LLC, which says the
    company is poorly managed and wants to see key executives shown the door.

    Houston-based Geospace provides seismic detection devices to oil explorers, and it has also been expanding its non-seismic product
    lines.

    The company's seismic detection devices for land and marine use provide data to oil explorers that helps to locate oil and gas reserves
    and to understand the geological features of the exploration area.

    Such technology used to rely on cables, but Geospace products are wireless. Product lines include equipment for use on land, the sea
    floor and in boreholes. The company has also been expanding into non-seismic technology, including printing and industrial
    manufacturing.
    Like many other funds, Lemelson Capital focuses on value and special situations, but it is one of the few that builds ethics into its
    decisions.

    "Lemelson Capital Management has advocated a Christian philosophy of investment based on a belief that investments selected on
    strict value criteria mitigate risk and often lead to better than average returns, a cornerstone of good stewardship," according to its
    website.

    Fr. Emmanuel Lemelson is a Greek Orthodox priest and the CIO of Lemelson, which is the general partner of the Amovna Fund LP.

    Marlborough, Mass.-based Lemelson Capital disclosed in a May 15 regulatory filing that the fund is no longer a passive investor. The
    fund controls 9.3% of Geospace's shares.

    The investor has a variety of issues with the company's performance, and the recent regulatory filing refers to a pointed Feb. 9 letter to
    management. The letter has not received a response, at least in regulatory filings or news statements.

    "As a result of the prior letter, the investment intent had changed from a passive investor to attempting to influence a change in the
    direction of the Company," the recent filing says.

    The Feb. 9 letter made no bones about Lemelson Capital's criticism of the company.

    "Lemelson Capital Management LLC, as the beneficial owner of approximately 10 percent of Geospace Technologies outstanding
    shares, is calling for the immediate removal, for cause, of Mr. Rick Wheeler, CEO and Mr. Tom McEntire, CFO," the letter said.

    "In addition, Lemelson Capital Management LLC urges the board to contemporaneously explore a sale of the company."

    The letter delineated specific performance measures behind its recommendation.

    "As a direct result of the failed management of Mr. Wheeler and Mr. McEntire, the stock price of Geospace has recently hit a new 52-
    week low, (plummeting nearly 90 percent since Mr. Wheeler took over as CEO in January 2014). This despite the extraordinary industry-
    wide recovery in the oil and gas sector .... "

    In addition to the performance issue, the fund also maintains that Geospace filed a misleading Form 8-K on Feb. 7, which the investor
    alleges masked voting improprieties at the last Geospace annual meeting.

    The letter also states that Geospace has lost contracts with significant players including Statoil (STO)—and lost them to an "obscure"
    provider.

    Geospace did not respond to inquiries from The Deal, but the company had already provided a rationale for its performance during its
    May 4 earnings call.

    During the call, management argued that the increase in oil prices led to increases in spending on production and decreases in spending
    on exploration, which drives the company's revenues.

    Management noted that while seismic equipment revenue had fallen since the last quarter, printing revenue was flat and industrial
    manufacturing revenue had increased.

    Wheeler stated that oil price increases have pushed many companies into cash flow positive territory.

    "Nevertheless, there remains a hesitancy to increase spending, given the history of how costs have spiraled upwards in the past,"
    Wheeler said.

    "As the seismic market takes on recovery, we believe our support and dedication to our customers' needs for both new and existing
    technological products favors us."

    Geospace did not respond to inquiries. Lemelson Capital provided letters, a video and analytical information not available in Securities
    and Exchange Commission filings.
    For more coverage like this, sign up for the Activist Daily.

    There's still time get your ticket to join host Jim Cramer and keynotes Paul Singer, Nelson Peltz, Jeff Gennette and Steve Mollenkopf at
    the Corporate Governance conference on June 7, 2018 in NYC. Gain insight on methods for managing companies to maximize
    shareholder value. Registration ends on June 4 so get your ticket today. Special pricing available for The Deal's readers; for more details
    contact your account manager.

    This copy is for your personal, non­commercial use only. To order reprints for distribution to your colleagues or clients please visit: 

    http://www.thedeal.com/reprints­permissions/ or call +1 212­321­5070.

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