Stock in Salt Lake County-based ZAGG Inc. fell 13 percent in trading Monday amid reports that co-founder and former CEO Robert G. Pedersen II left the company last week after selling 515,000 shares in the company in a margin call.
It is not clear whether the company’s board of directors forced his exit. Although there apparently was no policy prohibiting stock sales to meet margin calls, the board adopted one two days after his resignation, banning anyone associated with ZAGG "from engaging in short-term or speculative transactions" such as "holding securities in a margin account," according to a document ZAGG filed Monday with the Securities and Exchange Commission.
Pedersen, who is ZAGG’s largest shareholder, sold 14 percent of his stake in ZAGG to meet the Aug. 14 margin call, according a report filed with the SEC. Three days later, Pedersen stepped down as head of the company.
"We believe this swift action [the resignation] was related to [the] margin call, which forced Pedersen to sell 515,000 shares . . . at an average price of $8.22/share," Roth Capital analyst Dave King wrote in a note to investors Monday.
In practice, an investor would receive a margin call from a broker if one or more of the securities the investor had bought with borrowed money decreased in value past a certain point.
In a phone interview with The Salt Lake Tribune Friday, Pedersen said he resigned to focus more on his family and church and because he felt the company could move forward with a different CEO in light of ZAGG’s share price dropping 25 percent in recent weeks after its guidance for the year failed to meet Wall Street expectations.
"Running a public company is different than running a private company," said Pedersen. "And running a $250 million company is different than running a company going from zero to $250 [million in annual revenue]."
Calls Monday to Pedersen, who had been vacationing in Alaska, were not returned. The company, contacted Monday, declined to comment.
Randy Hales, ZAGG’s current president and COO, will be interim CEO while the board of directors searches for Pedersen’s replacement. Cheryl Larabee was named chairperson of the board, and according to the SEC document Pedersen will remain as a consultant for one year.
Commenting on Hales as the interim CEO, Roth’s King said: "We previously viewed him as the likely successor, having been impressed by his efforts to streamline operations and expand the product offering since joining the company last December."
Though ZAGG posted second-quarter financial results that included $61.9 million in revenue, a 59 percent increase over the same period a year ago, the stock’s price had dropped more than 30 percent from the year’s high of $12.15 per share on May 23. Shares closed Monday at $7.30, down $1.12.
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