A San Antonio-based media and communications company that was a major force in Texas decades ago has seen its stock price fall below a dollar a share, and a partner has swooped in an attempt to correct the stock’s continued low price.
Harte Hanks Inc. – HHS on the New York Stock Exchange (NYSE) – announced Wednesday that Wipro Limited (NYSE: WIT), a global information technology, consulting, and business process services company, has taken a minority stake in the company. Wipro has multiple subsidiaries and its headquarters are in Bengaluru, India. In 2017, the company reported revenue of $8.48 billion.
This comes at the same time a Harte family split has been revealed through documents filed with the U.S. Securities and Exchange Commission.
Nearly a month ago, on Dec. 27, the company’s patriarch, Houston H. Harte, filed a charge with the SEC that the management practices of his nephew, Christopher M. Harte, the company’s chairman, has placed at risk the 6 million shares he and his family have held since the company’s founding three generations ago.
Houston Harte filed a Schedule 13D for Harte Hanks to take actions to enhance and preserve shareholder value. Harte, whose father was one of the company founders, gave 60 years of service to the company before resigning in 2013. He served on the board for 25 years. His nephew Christopher has been Harte Hanks Inc.’s board chairman since 2013 and has held a board seat since 1993. Christopher is the son of the late Edward H. Harte, a renowned newsman and conservationist.
On Jan. 12, Houston Harte was joined by another majority stakeholder, Bradley Radoff, of the hedge fund Fondren Management, who also filed a Schedule 13D. Radoff owns 3,680,000 shares. Harte Hanks has not issued any public responses to these filings.
Harte Hanks was founded in 1923 by Houston Harte and Bernard Hanks and, for the first 50 years, owned newspapers throughout the U.S., including the San Antonio Express-News, which it owned from 1962-1973, and the Corpus Christi Caller-Times. Since its founding, the company has been taken public (1972), then private again (1984), and taken public again (1993).
The Wednesday announcement about Wipro comes just weeks before an original NYSE deadline of Feb. 9 to initiate delisting procedures if Harte Hanks’ stock continued to stay below $1. This deadline was given last August, when Harte Hanks was notified that its common stock had fallen below the minimum share price of $1 over a 30 trading-day period.
The company was notified on Nov. 7, 2017, that its common stock was back in compliance, but then the day after Christmas, NYSE again notified Harte Hanks that its closing price was below the $1 average. The company has six months to cure its non-compliance. During this “cure” period, the common stock will trade under HHS with the added symbol of .BC to indicate the company is “below compliance.”
In an attempt to raise the stock price, Harte Hanks announced on Dec. 29 that its board of directors had adopted a 10-for-1 reverse split ratio for the reverse split approved by stockholders at a Dec. 14 special meeting. The reverse split will be effected on Jan. 31, and will cause an increase in the stock price.
On Jan. 18, Harte Hanks announced that Executive Vice President Shirish Lal was leaving to pursue other opportunities, and that the company was “streamlining its executive team.”
In a deal that is expected to be completed next week, Wipro Limited will invest $9.9 million in Harte Hanks. It will receive preferred stock convertible into 16% of Harte Hanks Inc.’s outstanding common stock on a pre-closing basis, priced at $0.991 per share. In addition, Wipro will be able to designate an observer or director to Harte Hanks’ board of directors.
In 2005, the company’s stock shares were selling at close to $30, but they have been a declining cycle since 2010. As of market closing Wednesday, the stock quote for HHS was $0.93, down 2.92 percent, while the stock quote for WIT is $5.51, up 1.66 percent.
Today Harte Hanks has evolved into a marketing services company that specializes in omni-channel marketing solutions including consulting, strategic assessment, data, analytics, digital, social, mobile, print, direct mail, and contact centers. Harte Hanks Inc. maintains corporate headquarters in San Antonio but has 5,000 employees worldwide, with 32 offices in six different countries, including the U.S., Belgium, Romania, the United Kingdom, and the Philippines.
The company’s 2016 revenue was $404.4 million, down 9 percent from the previous year. For the third quarter of 2017, the last period for which results are available, revenue was $94.4 million with a net per-share loss of $.04.
On March 15, 2017, Harte Hanks and Wipro announced that the companies would team together to combine Harte Hanks’ agency expertise with Wipro’s global technology systems’ delivery capability. The announcement included plans to offer marketing technology services, with a focus on next-generation data and analytics, as well as plans to upgrade Harte Hanks’ data analytics and applications platform, create a scalable operating model and simplify the company’s IT-related processes. Wednesday’s announcement formalizes the relationship.
Time will tell whether or not this latest move will cause an upswing in Harte Hanks, which has experienced turmoil in recent years. As its stock has bottomed out, it is unclear whether Wipro’s stake more closely resembles a hostile takeover than it does a rescue.
