While Republic First Bancorp announced that it would pause the previously announced plan of raising $125 million, a group of activist investors led by South Jersey power broker George Norcross, and former TD Bank U.S. Chief Executive Greg Braca, resumed their proxy fight to remove board members Harry Madonna Andrew Cohen Lisa Jacobs, and Harris Wildstein.
Republic First, a Philadelphia-based company (NASDAQ: FRBK), announced on Monday that it had an "adequate" position of capital after making a decision to leave the mortgage origination industry and to streamline its commercial lending department in New York City. This was part of its new strategic plan for a refocussed focus on its core business.
Republic First, in light of this, will suspend the $125 million capital raising led by Castle Creek Capital & an affiliate of Cohen Private Ventures announced on 10 March. The board of the company has decided to wait for the market to stabilize, before finding additional participants who can complete the capital raise at acceptable terms. The board of directors of the company worked with independent financial and legal advisors to assess the bank's short-term capital requirements in light of recent market disruptions caused by Silicon Valley Bank and Signature Bank.
Capital raises were priced at $2.25 a share. This was well above Republic First’s closing stock price of $1.83 a share on March 9, when the plan announcement was made. The bank's share price has declined since then, closing at $1.02 per share on Monday.
The Norcross-Braca Group was not pleased with the decision to pause capital raising. It has been at odds with the bank since over a year, first with former Chairman Vernon Hill, and then after Hill's removal last summer with a board faction led Madonna, who is the co-founder of the bank.
The Norcross-Braca Group noted in a press release that the capital raising was priced well above Republic First's most recent stock price. They believe that 'raising equity at a substantial premium to its current stock price will be beneficial to shareholders, and not dilutive'.
Norcross-Braca also announced that it would continue its proxy battle for control of Republic First, and continue to fight what it called Republic First's attempts to 'entrench the current board leadership' by reducing board size from eight to seven. The group said it would seek to replace the board members who are up for election during the long-delayed company's annual meetings. It will also install new management, and resume direct communication with shareholders.
Sources familiar with the matter said that the two sides were discussing ways to end their months-long dispute. The Norcross-Braca Group's statement on Monday indicates that these discussions did not end in success.
Braca stated in a press release that 'we believe it's clear Harry Madonna and Andrew Cohen mismanaged Republic First over the years, and now shareholders are paying the price. They're unwilling to do the right thing: Give up control and move out of the way.' The recent inaction, and the failure to raise much-needed capital, only proves that these four legacy board members care more about themselves than Republic First or its future. We will keep trying to protect the shareholders if they refuse to act.
Ramy Djerassi, Philadelphia Common Pleas judge, issued an order on April 21 in a suit filed against the bank. The lawsuit was brought by Madonna and six members of its board. The judge ruled the bank had to reopen the nominations of board directors candidates for its 2022 annual meeting 15 days after the 15th of May and that Norcross-Braca could make up to three nominations. Republic First in November rejected Philip Norcross' nomination of Braca for procedural reasons. The Norcross-Braca Group then filed a suit. Djerassi delayed the planned annual meeting of the bank shareholders that week to May 31 in order for him to preside over an hearing on the Norcross/Braca group’s preliminary injunction.
Braca is one of several nominees for the current board members Benjamin C. Duster III and Peter B. Bartholow to be replaced at the meeting in 2022. The Norcross/Braca group has said that it will also be seeking to replace Madonna in 2023 and will be considering additional nominees. Republic First hasn't held a public meeting for over two years. A date for either meeting has not been announced.
The Norcross-Braca Group said that it would also continue litigation in relation to the company's attempts to reduce its board size from eight to seven.
Norcross-Braca emerged as activists investors on January 31 last year. They initially challenged the leadership of Hill, and made it clear that they wanted Braca to be installed as CEO of Republic First. The group offered to purchase a majority of the company in March for $50 million, with a view to making Braca CEO. It has since offered $100 million to acquire a stake less than 50% and two board positions.
Hill and his ally resigned as board members and from management positions after losing the power struggle with the board faction headed by Madonna, who was appointed interim chairman and CEO. The Norcross-Braca Group maintained its activist investor position despite this. The bank announced in August that it had retained an investment firm to investigate transactions, after receiving several offers. However, the Norcross Braca group has continued to be dissatisfied with the way the bank was being run, and it is using its near 10% stake to voice this dissatisfaction.
Republic First had no immediate reaction to the Norcross Braca group's announcement. It did, however, say that its new management team led by CEO Thomas Geisel will implement additional initiatives in the next few weeks and months to further its strategic realignment.
Geisel stated in a press release that the actions taken and those to come will lay the foundations for a more profitable, efficient business which can enhance value for all stakeholders and shareholders. "The recent initiatives have already had a positive effect, but they are only the first steps of our strategic realignment for the bank. We are committed to taking action to protect the bank's assets, to strengthen our core business and to position us for additional investor commitments when the time is right. We are committed to protecting Republic's shareholders from unnecessary and excessive dilution.