A group of dissident investors that has been attempting to overthrow the board of Aetrium, Inc., has now sued the company.
The investor group, which owns about 17 percent of North St. Paul-based Aetrium’s shares and bills itself as Concerned Aetrium Shareholders, is accusing the company’s incumbent directors of a “gross violation of shareholder rights.” The group said in a filing with the U.S. Securities and Exchange Commission that the lawsuit was filed late last week in a Minnesota state court.
The company, meanwhile, said in a statement that it “strongly believes there is no merit in any of the allegations or claims” in the lawsuit, and Aetrium “intends to vigorously defend against it.”
News surfaced in September that the investor group, led by Jeffrey Eberwein, was fighting for control of the board of Aetrium, a public company that makes equipment used by the semiconductor industry. The group called for a special shareholder meeting, which was held November 26.
Following the meeting, Eberwein told Twin Cities Business that about 45 percent of the company’s shareholders voted in the proxy battle, and the dissident group received roughly 88 percent of the votes cast.
But Aetrium, citing a company bylaw, said that no official business was conducted at the meeting, and the vote was moot, because 50 percent of shareholders must participate to constitute a quorum. And Aetrium President and CEO Joseph Levesque said in a Monday statement that “at most, 12 percent of our shares joined Mr. Eberwein’s group in favoring their takeover.”
The investor group called foul, saying that elections should be conducted on the basis of “most votes wins,” regardless of turnout, adding that Aetrium’s previous elections have been conducted that way.
Furthermore, the group claimed that Aetrium changed its bylaws for adjourning shareholder meetings “just hours” before the meeting was held. Shareholders were previously allowed to extend meetings to a later date in order to allow time for more votes to be cast, but the rules were changed to give the chairman sole power to postpone such a meeting. The shareholder group called the rule change “illegal and void.”
The lawsuit seeks confirmation of what the investor group calls “the original and correct quorum rule,” so that the side that received the most votes wins. The suit asks the court to restrain Aetrium from further changing its bylaws, and it seeks an order extending the shareholders meeting to December 10, the investor group said in a statement.
The investor group has claimed that it is necessary to replace Aetrium’s leadership because the existing board has been unable to halt a drop in the company’s stock price, poor financial performance, and excessive compensation, among other accusations. In 2011, Aetrium recorded a $4.7 million net loss on revenue totaling $9 million—down 45 percent from the previous year.
The company’s leaders have pointed out that demand for semiconductors has been down since the recession, but industry forecasters are predicting a rebound. Levesque has refuted accusations that the company’s leaders are overpaid and said that he’s been voluntarily working under a reduced salary.
Levesque said in a Monday statement that Eberwein became a shareholder “for the express purpose of taking control of the company.” He repeated an earlier assertion that the investor group “has no experience in our industry and no plan for directing the company forward.”