Investors in Qualstar Corp. met June 20 for a special meeting to vote on bringing in a new board of directors to turn around the financially struggling company.
Results of the vote will be released within the next five days but management of the Simi Valley company said that based on preliminary results the attempt by dissident shareholders to replace the board fell short.
Greg Heller, senior vice president with BFK Capital, the investment group pushing for a new board, said the matter was far from settled.
“They are claiming victory and they can do that but the vote has not been validated,” Heller said.
BKF Capital, headquartered in Boca Raton, Fla., and its controlling shareholder Steven N. Bronson, said Qualstar management team has failed to increase profitability and drive up the stock price. BKF and Bronson together hold more than 2.1 million shares, or a 17.3 percent stake.
Shares in Qualstar closed at $1.93 on June 20, up four cents from the day before.
Qualstar, which employs about 70 workers at its single site in Simi Valley, makes tape-based data storage devices and its N2Power division makes power supply products.
BKF asked for the special meeting in late May and since then Qualstar has taken steps to calm investors and show that management was serious about turning around the company. For example, Larry Firestone, the new CEO, took over that position two weeks earlier than anticipated.
Firestone replaced William Gervais, a co-founder of Qualstar and the largest single investor.
The preliminary vote shows support and confidence in the management’s turnaround strategy, Firestone said in a prepared statement sent out following the special meeting.
“We are pleased to have this disruption behind us so we can devote our full attention to the operation of our business and the execution of the turnaround plan,” Firestone said.
In the weeks leading up the vote, support came out in favor of changing the board.
Porter Orlin LLC, an advisory firm to investors holding 7.2 percent of Qualstar shares, backed new directors with turnaround, financial and accounting experience, and BKF’s suggestion of selling the data storage business to focus on the power supply business.
In a report released this month, the corporate governance services firm Institutional Shareholder Services Inc. said that BKF made a compelling argument favoring change in the board and that its slate of board candidates had the experience to make changes in the company.
A majority of the holders of outstanding shares in Qualstar need to vote in favor of removing the board for the BKF slate to take over, Heller said.