Utah's ZAGG moves to soothe investors
Executives for Salt Lake County-based ZAGG Inc., which produces protective shields for mobile devices, tried to assure investors Tuesday not to worry about the company's future after co-founder and former CEO Robert G. Pedersen II resigned abruptly earlier this month.
In a conference call, ZAGG officials commented publicly for the first time about Pedersen's resignation, saying new management is in place to move ZAGG forward.
"ZAGG has an outstanding leadership [team] in place," said interim CEO Randy Hales. "We believe the company is well positioned for this next phase in development and growth."
Pedersen resigned Aug. 17 after he sold 515,000 ZAGG shares 14 percent of his stake at $8.22 per share to meet an Aug. 14 margin call. Two days later, stock in ZAGG fell 13 percent on the news.
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.
Since then, Pedersen sold another 1.2 million shares, on Aug. 24, which closes out his margin position, and he will no longer be subject to a margin call, Hales said.
"By completely de-leveraging my ZAGG stock, I have removed the element of uncertainty around future unwanted sales and have taken a step in building investor confidence in ZAGG," said Pedersen, who joined in the conference call.
Hales said Pedersen was asked to resign after selling the shares to meet the margin call. 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 with the Securities and Exchange Commission.
The former CEO and co-founder said he intended to spend more time with his family, as well as in his role as chairman of the board for HzO, a new Salt Lake County-based company that is producing a waterproof chemical process for mobile electronics.
ZAGG officials said they will be using a headhunting service to find a permanent replacement for Pedersen, a process that could take 90 days to 120 days. Hales said he will be a candidate for the position. Cheryl Larabee was named chairperson of the board, and Pedersen will remain as a consultant to the company for one year.
ZAGG's chief financial officer, Brandon O'Brien, on Tuesday said sales of the company's core product, the invisibleSHIELD plastic screen protector for the iPhone, were soft earlier this year in part because a new version of the phone was not announced by Apple in the summer as has been done in the past. Speculation is growing that a launch for the fifth iteration of Apple's phone is to be announced Sept. 12.
O'Brien said Zagg is counting on increased sales of the invisibleSHIELD for that new phone, and on two products it intends to launch later this year.
"We are a more robust company now with a greater reach for our customers," he said.
ZAGG shares closed regular trading Tuesday at $7.63, up 52 cents, or 7.3 percent, and were up another 4 cents in after-hours trading after the conference call.
ZAGG posted second-quarter financial results that included $61.9 million in revenue, a 59 percent increase over the same period a year ago. Despite that, the stock's price had dropped more than 30 percent from the year's high of $12.15 per share on May 23 because results did not meet Wall Street expectations.
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