The proxy contest between USA Technologies Inc. and several dissident shareholders has a new venue: federal court in Philadelphia.
The Malvern company that provides cashless-payment processing technology for vending machines last week postponed its annual shareholders meeting, set for Dec. 15, until June 15.
On Monday, shareholders Bradley M. Tirpak and Craig W. Thomas filed a civil lawsuit against USA Technologies and its board over the delay. Tirpak and Thomas, calling themselves Shareholder Advocates for Value Enhancement, have been seeking to place three people on USA Technologies' board. (One of those nominees is Tirpak.)
Launched Nov. 19, their proxy fight had won support from two proxy-advisory firms, RiskMetrics Group and Glass Lewis & Co., before USA Technologies decided to reschedule its annual shareholders meeting. When proxy battles erupt over corporate-governance issues, institutional investors tend to rely on proxy-advisory firms' for recommendations how to vote their shares.
According to a complaint filed in U.S. District Court for the Eastern District of Pennsylvania, the investors contend that USA Technologies' board canceled the annual meeting "because they knew they were going to lose the election."
The dissident investors calculate that of the 10.3 million shares that had already been cast as of Dec. 11, more than 7.4 million were voted in favor of their nominees. USA Technologies' most recent proxy statement said that 22.7 million shares outstanding as of Sept. 30 would be eligible to be voted.
Tirpak and Thomas want a federal judge to order that the annual meeting should go forward.
In its statement announcing the meeting's postponement, USA Technologies' board said it was doing so in response to "misleading, inaccurate and selective disclosure" by the dissidents.
I should mention that this fight is over a tiny company that has never turned an operating profit. Founded in 1992, USA Technologies has a market value of only $34 million, and its cumulative losses were $179 million at September's end. As of Aug. 31, the company had 40 full-time employees.