CHICAGO - Lifeway Foods Inc. (NASDAQ:LWAY), a dairy and probiotic products company, is currently embroiled in a shareholder dispute as its largest shareholders, Ludmila and Edward Smolyansky, demand significant changes to the company's board and executive leadership. The Smolyanskys, who own approximately 29% of Lifeway, allege mismanagement and breaches of fiduciary duty by certain directors and the CEO, Julie Smolyansky.
The Smolyanskys' campaign for change at Lifeway began in February 2022, with a call to replace the CEO and explore strategic alternatives. Following the campaign's disclosure, Lifeway's shares surged about 50%.
However, despite a settlement to avoid a proxy battle in July 2022, the Smolyanskys claim the agreement was breached by February 2023. They also accuse the CEO of misusing company funds and her spouse, Jason Burdeen, of exercising undue managerial control without holding an official position.
Lifeway's stock price has suffered a significant decline, losing over 130% of its value since its intraday high on May 10, 2024. Third-party valuation estimates suggest a target price of around $20 to $24 per share, contrasting sharply with the current stock price, which is below the $13 level mentioned in a 2016 tweet by Julie Smolyansky.
The shareholders criticize Lifeway's operational decisions, including an unauthorized acquisition of Glen Oaks Yogurt in 2021 and a failure to capitalize on the stay-at-home environment during the Covid-19 pandemic. They also highlight excessive advertising expenses and the lack of a formal budget and marketing plan.
Edward Smolyansky's letter to the board outlines a "pattern of retrenching and silence" in the face of criticism and mediocre results, suggesting a toxic culture of "greed and narcissism" at Lifeway. The Smolyanskys seek the immediate removal of CEO Julie Smolyansky, several directors, and the adoption of an anti-nepotism policy. They also propose a new independent board, including Ludmila Smolyansky, and an invitation to current and past Director Juan Carlos Dalto.
This contentious situation underscores the ongoing struggle for control at Lifeway, with significant implications for the company's future direction and governance.
The information is based on a press release statement from the Smolyanskys.
In other recent news, Lifeway Foods has announced record-breaking Q1 sales for 2024, with net sales reaching a significant $44.6 million, a 17.8% increase from the same period in the previous year. The company's net income has also seen a substantial rise, nearly tripling to $2.4 million, while the gross profit margin improved to 25.8%. These developments are largely attributed to the increased volumes of Lifeway's flagship product, kefir.
In addition to these financial highlights, Lifeway Foods is investing in its e-commerce strategy and targeted advertising on retail partner sites and platforms. The company has also secured additional distribution opportunities at major stores, enhancing its reach to consumers. The CEO expressed confidence in the company's future growth and anticipates providing further updates in their second-quarter earnings call.
These are recent developments at Lifeway Foods, reflecting the company's continued focus on its core product line and its strategic investments in marketing and e-commerce.
InvestingPro Insights
As Lifeway Foods Inc. (NASDAQ:LWAY) grapples with internal disputes and shareholder demands for sweeping changes, the company's financial standing provides a mixed picture. According to recent data from InvestingPro, Lifeway holds a market capitalization of roughly $191.64 million, suggesting that despite the controversies, the market still recognizes substantial value in the company. With an adjusted price-to-earnings (P/E) ratio of 14.81 for the last twelve months as of Q1 2024, Lifeway is trading at a relatively low earnings multiple compared to industry peers, which may indicate that the stock is undervalued.
In the short term, Lifeway has experienced significant volatility. The company's stock price has seen a notable return over the last week, increasing by 10.42%, yet the three-month performance depicts a starkly different scenario, with the price having fallen by 31.85%. This volatility reflects the current uncertainties surrounding the company's management and direction.
Despite the tumultuous stock performance, Lifeway's balance sheet strength is underscored by an InvestingPro Tip highlighting that the company holds more cash than debt, providing some financial flexibility amidst the shareholder turmoil. Additionally, analysts predict that Lifeway will be profitable this year, which, if accurate, could help stabilize the company's financial position and potentially restore investor confidence.
For investors seeking deeper insights and additional metrics, InvestingPro offers a breadth of actionable information. There are 10 more InvestingPro Tips available for Lifeway Foods, which can be accessed through the platform's dedicated page for the company. Interested readers can use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing a comprehensive toolkit for informed investment decisions.
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