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Update 8:20pm: Adds ON24 capital return announcement, comments on Indaba letter.
ON24 Inc. (NYSE:ONTF) rose 1.3% amid a repeated call from an activist investor to improve the company’s stock price and for the company to return capital to investors.
Indaba Capital Management, which as a nearly 9% stake in ON24 and said its the company’s second largest holder, urged the company to establish stablish a specific plan for returning $150 million to shareholders, according to a letter Indaba wrote to ON24’s board.
ON24 (ONTF) announced late Wednesday that its board authorized the replacement of the company’s prior capital return program with a new $100 million capital return plan. The company intends to execute the plan with available cash on hand and expects to start the program following its upcoming earnings release. ON24 rose 1.4% in after hours trading.
“We have attempted to engage constructively with Indaba at every point leading up to the $100 million capital return program we are announcing today,” ON24 said in a statement.
ON24 said board members have met directly with Indaba four times since December to discuss capital allocation and other matters.
“The Board and management team are thoughtfully considering the method of capital distribution that will be most advantageous to all shareholders, and we welcome additional shareholder input in that process, including further engagement with Indaba,” ON24 said.
The activist latest push comes after the investor in December said the company’s board needs to take urgent action to improve its stock price, balance sheet and valuation. ON24 shares fell 50% last year and 80% since its first day of trading in February 2021. ON24 (ONTF) offers webinars and other video-based marketing efforts that help B2B companies reach out to current and potential customers. ONTF stock gained 13% this year before Wednesday.
“There is no plausible rationale for ON24 keeping so much cash on its balance sheet, especially when the company has not disclosed a clear and credible plan for investing that capital and producing strong returns for shareholders,” Derek Schrier, managing partner of Indaba Capital, wrote in the letter.
Indaba proposes that ON24 should implement a $75 million dividend, a $50 million accelerate share repurchase plan and a $25 million 10b5-1 plan.
The activist investor also wants ON24 to appoint an Indaba designee as a director, de-stagger its director classes and set up a committee of independent directors to oversee capital allocation.
Goldman Sachs is serving as financial advisor to ON24 and Skadden, Arps, Slate, Meagher & Flom LLP is serving as ON24’s legal counsel.
ON24 (ONTF) is scheduled to report Q4 results on Feb. 28.
