SIOUX FALLS, S.D. (KELO) — The founder of the largest investor in Daktronics said he never wanted the relationship to be adversarial between his company and Daktronics leadership.
But as of this week, it seems it is.
Connor Haley, the founder and managing partner of Alta Fox, said in a KELOLAND News interview that the investor had good faith ideas and expectations it shared that Daktronics is ignoring. That has led to Alta Fox to say it plans to call a meeting of shareholders to replace at least several board members with its recommendations and changes in top leadership.
“This never needed to be an adversarial relationship,” Haley said. “We did not want that.”
Daktronics, based in Brookings, makes video scoreboards, LED displays and similar. It has worked with multiple college teams and professional sports teams.
KELOLAND News requested an interview with a Daktronics official but it could not be scheduled.
Daktronics said in a Dec. 11 news release that it has engaged in good faith with Alta Fox but that Alta Fox’s price demand for repaying a $25 million loan was not good for shareholders. Daktronics also said that changes made in fiscal year 2024 resulted in a Dec. 11 stock closing price of $19.24 per share, which is above the target price Alta Fox set in May of 2023.
Haley said Daktronics has underperformed for 11 years under the leadership of chief executive officer Reece Kurtenbach. Alta Fox made an original investment of $100 million because the company had potential, Haley said. Alta Fox noted signs of financial distress in September of 2022 and outlined several recommendations, according to a presentation published this week.
Alta Fox said it had offered to provide more investment, but Daktronics ignored the offer for help, Haley said.
Then, in Dec. 5, 2022, report to the SEC, Daktronics cited “that there is substantial doubt about the Company’s ability to continue as a going concern…” The report also said the company needed to obtain financing secured by a mortgage on its facilities, as well as make other changes to improve its financial situation.
“Daktronics was facing financial peril,” Haley said. Alta Fox made the $25 million investment in promissory notes in May of 2023.
Alta Fox made recommendations to improve Daktronics’ financial situation, Haley said.
“Unfortunately they did not consider our proposal,” Haley said.
Daktronics did not address specific improvement proposals from Alta Fox in a Dec. 11 news release. It did say that Alta Fox’s recent criticism is because it demanded that the company retire the debt at a price more than three times its face value. The board rejected the Alta Fox proposal as “too costly for shareholders,” according to the news release.
“Daktronics pictured us as bloodthirsty creditors that are not in line with shareholders,” Haley said.
But Alta Fox is acting for shareholders by providing them a means to change the leadership and improve the financial health of the company, Haley said. The stock price per a Daktronics share should reach almost $40 by fiscal year 2028, if it makes needed changes, according to an Alta Fox presentation.
This isn’t the first time Alta Fox has publicly criticized Daktronics leadership. In January of 2023, Alta Fox said in a letter to shareholders that it had “no confidence” in the company’s top two leaders, Kurtenbach and chief financial officer Sheila Anderson.
In a Jan. 27, 2023, statement to KELOLAND News, Daktronics said it had secured a $10 million maturity on the company’s credit facility. It was focused on longer-term liquidity and was actively reviewing alternatives.
“We expect to engage with Alta Fox on its proposal in connection with this review, as we have told Alta Fox on numerous occasions,” the statement said.
