Embattled current board members are fighting to maintain their positions and are accusing CW’s founders of a conflict of interest as they try to unseat them.
There is no shortage of drama and high-stakes corporate intrigue at one of the world's largest and most influential CBD companies. Last month the founders of Charlotte's Web, brothers Joel and Jesse Stanley, attempted to organize a board of directors coup during the company's annual meeting on June 12.
Unhappy with the existing state of affairs at the company they founded and helped take public in September 2018, the brothers released an incendiary press statement that bluntly said CW’s future viability is "at risk" because of strategic missteps, uncontrolled spending, and poor hiring practices from the current executive leadership.
Joel Stanley said in the statement, "The incumbent Board and management's business strategy has been to pin their hopes on FDA regulations changing in favor of the business. Rather than innovate within the current framework, the Company continues to burn money on conventional marketing."
"The incumbent Board and management's business strategy has been to pin their hopes on FDA regulations changing in favor of the business. Rather than innovate within the current framework, the Company continues to burn money on conventional marketing."
- Statement Regarding Charlotte's Web Current State by Founder Joel Stanley
As part of their strategy to help stop the bleeding and right the ship at CW, the Stanleys called for the resignations of four current directors, including board President John Held and CEO Jacques Tortoroli. In addition, the brothers nominated themselves to a slate of four new candidates creating a reconstituted board to help address the myriad of issues facing the ailing CBD giant.
Now the current Board is fighting back in a very open and public manner. As first reported by Hemp Today, following the audacious and dramatic events at the June 12 meeting, the embattled Board fired off its own statement criticizing the founders for attempting to take over the Company in direct violation of corporate by-laws. As part of their statement, the directors also pointed out that if they successfully regain stewardship of CW, the Stanleys' actions would result in significant conflicts of interest.
In its press release, the Board states, "There are significant ongoing business relationships between Charlotte's Web and entities in which ‎Joel and/or Jesse hold direct or indirect interests, certain of which are or will be subject to Board review and approval in the near future. This would ‎effectively hand control of the Company to individuals of which at least two have significant conflicts of interest and who have ‎elected to avoid appropriate vetting procedures. Such procedures are designed ‎to, among other things, protect shareholders from conflicts of interest."
"There are significant ongoing business relationships between Charlotte's Web and entities in which ‎Joel and/or Jesse hold direct or indirect interests, certain of which are or will be subject to Board review and approval in the near future. This would ‎effectively hand control of the Company to individuals of which at least two have significant conflicts of interest and who have ‎elected to avoid appropriate vetting procedures. Such procedures are designed ‎to, among other things, protect shareholders from conflicts of interest."
- Statement by the Current CW Board Concerning Joel and Jesse Stanley
During the annual meeting, all existing directors received re-election to their positions on the Board. However, because the Stanleys convinced more than 65% of shareholders to withhold votes for Held, Tortoroli, and independent directors Thomas Lardieri and Alicia Morga, that quartet effectively received an expression of no confidence from shareholders.
As a result, each of those members had to offer up their resignation per the company's "Majority Voting Policy."
According to a post-meeting press notice from the directors, "Given that certain of the directors received less than majority support at the Meeting, each such director has complied with the Company's majority voting policy and has provided an offer to resign from the Board to the Board. The Board will, in accordance with the Majority Voting Policy, make a determination in due course on whether or not to accept any (resignation) Offers."
At its peak, CW's stock price reached an all-time high of $21.90 on April 1, 2019. However, since those heady pre-pandemic days, the current value has plummeted to a mere $0.1840 (about 18 cents) as of close on Monday, July 3.
According to its year-end financial statement, CW suffered a net loss of $59.3 million on revenues of $74.1 million last year, which put the Company's total losses at $186 million for the two years ending March 31, 2023. The brothers attribute those dismal numbers to "a steady decline in revenue across all channels, with little to no product innovation or SKU expansion."
Regardless of who or what is to blame for the unprecedented collapse by one of the industry's pioneering titans, no one disagrees that fundamental and decisive changes are needed if Charlotte's Web is to stem the tide and find a way out of the financial abyss.
Whether or not a return to the helm by CW’s founders is the solution remains to be determined. However, staying on its current course appears to provide no appeal or solace for any parties involved. Summertime in the CBD industry just got a lot hotter.