A week after nominating a spate of new candidates for the Purple mattress board, activist investor Coliseum Capital Partners has filed a lawsuit against the online bedding company’s board.
The suit, which was filed in the Delaware Court of Chancery, calls to invalidate Purple’s recently issued “proportional representation preferred linked stock,” which Coliseum said “deprives Purple stockholders of a fair and democratic election of directors at the company’s 2023 annual meeting.” The new stock, PRPLS, was issued last week in response to Coliseum Capital’s board nominations.
Coliseum, which owns a 44 percent stake in Purple, nominated five candidates to the mattress company’s seven-member board, including Coliseum’s co-founder and managing partner, Adam Gray.
“The Purple Special Committee’s brazen action – taken no more than 24 hours after Coliseum proposed five highly qualified candidates for election – demonstrates the lengths to which the incumbent non-executive directors will go to preserve their board seats at the expense of stockholders,” Gray said in a press release announcing the lawsuit. “To seek such board security amidst a contested election – and leveraging corporate machinations and stockholder resources to do so – is further evidence that board change is warranted. While Coliseum has sought to work constructively with the Purple board – consistent with the collaborative investment approach we have executed successfully for the past 15-plus years – we have been left with no choice but to take the extraordinary step of a proxy contest and filing litigation seeking to ensure the election of directors is conducted in a fair and democratic manner for the benefit of all Purple stockholders.”
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Coliseum’s lawsuit asks the court to declare a number of items, including: the named non-executive director defendants breached their fiduciary duties, Purple and non-executive director defendants violated the company’s charter, Coliseum’s nomination notice is valid, and the preferred stock issuance is invalid, unenforceable and void.
“As a longstanding stockholder of Purple and a continued provider of much-needed capital to the company throughout its time as a public company, Coliseum believes in Purple’s tremendous potential and the ability of Purple’s management team to steer the company toward success,” Gray said. “That said, we also strongly believe that Purple stockholders deserve a highly credentialed, nimbler, more engaged and aligned board that will not only support management, but also protect and restore stockholder value.”
Last fall, Coliseum made an offer to buy Purple and take it private, but a special committee of the mattress company’s board rejected that offer, saying it devalued the company.
A spokesperson for Purple responded to the lawsuit, saying, “The purpose of the PRPLS is to protect all shareholders and treat them equally. We believe Coliseum’s complaint is without merit and is simply another example of Coliseum putting its own agenda ahead of what is best for the rest of the company’s shareholders.”