TIXC Tix Corporation (CE)

LOS ANGELES, July 20, 2011 /PRNewswire/ -- Baker Street Capital, L.P. announced today that it has issued an open letter to all stockholders of Tix Corporation (OTCQX: TIXC).  Baker Street is the largest stockholder of Tix, with current ownership of approximately 22% of the shares outstanding.  

The full text of the letter follows:

July 20, 2011

Dear Fellow Stockholders of Tix Corporation:

BAKER STREET HAS NOMINATED A HIGHLY-QUALIFIED SLATE OF DIRECTOR NOMINEES

Baker Street Capital, L.P. ("Baker Street" or "we") is the largest stockholder of Tix Corporation ("Tix" or the "Company"), owning approximately 22% of the outstanding stock.  We initially attempted to engage in an amicable and productive relationship with the Tix Board and management and explore opportunities to unlock the value of Tix shares for all of its owners.  Unfortunately, as this relationship progressed, we began to seriously question whether the Tix Board and management have prioritized the interests of stockholders. Our concerns were heightened by a series of actions taken by Tix, which we believe have been detrimental to stockholders.  In response, we have nominated a slate of five highly-qualified, independent director nominees for election at the 2011 Tix Corporation Annual Meeting.  Our nominees are committed to working tirelessly for Tix stockholders.  We believe our nominees have the expertise and experience necessary to maximize stockholder value.

UNDER THE CURRENT TIX BOARD, STOCKHOLDER VALUE HAS DETERIORATED OVER THE COURSE OF THE LAST FOUR YEARS

In its June 30, 2011 letter to stockholders, Tix boasts of "exceptional recent success" and a period of strong and consistent growth during the past seven years.  In addition, the letter states that the Tix Board and management team strongly believe that the Company has delivered value to stockholders by achieving this growth.  Unfortunately, growth in revenues and ticket sales has not translated into corporate profits or stockholder returns that we believe are acceptable to stockholders.  The June 30 letter makes no mention of these two metrics that we believe matter most to stockholders.  Consider the following:

• Ill-Advised Acquisitions - In 2007, Tix acquired Exhibit Merchandising for $46.5 million in cash and stock, which total consideration now exceeds the current enterprise value of Tix.  The following year, Tix recorded a $33 million write down of these acquired assets by impairing goodwill and recording a corresponding $33 million charge to net income.  Tix also acquired other businesses, such as Magic Arts and New Space, which were dilutive to stockholders and also resulted in significant impairment charges taken by the Company.
• Significant Consolidated Losses - Tix has sustained consolidated losses of $16.3 million, $34.7 million, $0.5 million and $3.0 million in fiscal 2007, 2008, 2009 and 2010, respectively.  These $54.5 million in combined losses exceed the current market capitalization of Tix. We believe these losses are consistent with an inability to translate revenue growth to profits or stockholder returns.
• Poor Share Price Performance – In 2007, Tix shares traded between $3.65 and $7.90 per share.  Since January 1, 2010, Tix shares have languished below $2.00, reaching a low closing price of $0.54 in September 2010.  When we filed our Schedule 13D with the SEC disclosing our ownership of Tix on November 12, 2010, the shares closed at $0.93.  We believe the increase in share price since our disclosure of a stake in Tix is reflective of a market view that change is needed at Tix to unlock the value of the business for the benefit of all stockholders.

WE BELIEVE IT IS NECESSARY TO REPLACE THE TIX BOARD TO PREVENT IT FROM TAKING FURTHER ACTIONS THAT SERVE ITS OWN INTERESTS AT THE EXPENSE OF TIX STOCKHOLDERS

In our letter to stockholders dated June 27, 2011, we expressed serious concerns with actions recently taken by Tix that we believe were designed to entrench the Board and management at the expense of Tix stockholders.  These actions include the following:

Contemplated Management-Led Buyout.  In March 2011, we learned that senior management may have been exploring a buyout of Tix without conducting a full and fair process to assure that stockholders received the highest possible value for their shares.

Unorthodox Share Escrow Arrangements.  On June 17, 2011, Tix announced that certain of its employees purchased an aggregate of 1,215,367 shares from one or more stockholders for $2.00 per share (representing a 14% premium to the then current market price) payable in installments over five years.  According to the Tix announcement, Tix has agreed to loan to the employees the funds necessary to make each installment payment and has guaranteed the employees' obligations to pay for the shares. These undisclosed Tix employees appear to have the ability to vote the shares.

Tix had also previously entered into agreements with managers of a subsidiary in December 2010 through which an aggregate of 6,266,524 shares were acquired by Tix and placed in escrow under the control of undisclosed persons, subject to undisclosed terms, to be voted on corporate matters.  

We believe both of these transactions were designed to entrench the current Board and management with the use of Company funds.

Rejection of Offer to Purchase Tix at a Premium.  On March 30, 2011, we offered, subject to certain conditions, to acquire all of the shares of common stock of the Company not already owned by us for a minimum of $2.10 per share in cash.  The purchase price represented a premium of 56.7% over the Company's closing price of $1.34 as of March 30, 2011.  The Board and its advisors failed to engage in serious discussions with us before rejecting the offer and failed to propose a strategy it believes will create greater value for stockholders.

Unilateral Amendment of Bylaws.  On May 10, 2011, the Tix Board adopted amendments to the Company's bylaws making it more difficult for stockholders to nominate directors.

Adoption of Poison Pill.  On April 1, 2011, the Company announced that it had adopted a stockholder rights plan, or "poison pill".  

OUR NOMINEES HAVE THE EXPERIENCE, SKILLS AND RELATIONSHIPS NECESSARY TO MAKE A DIFFERENCE

Baker Street has assembled an exceptional team combining individuals with extensive ticketing, marketing and entertainment experience with financial and operations professionals who understand the importance of good corporate governance.  We strongly believe our independent nominees will make a significant positive impact for the benefit of Tix stockholders by bringing to the Tix boardroom a focus on serving only the interests of Tix stockholders and maximizing stockholder value.

The following is a list of our Board Nominees:

Kenneth H. Traub - Ken has served as President and Chief Executive Officer of Ethos Management, a private investment and consulting firm, since January 2009, and as an operating partner of CI Capital Partners, a private equity investment firm with over $1 billion of capital under management, since November 2010.  From April 1999 until February 2008, Mr. Traub served as President, Chief Executive Officer and a director of American Bank Note Holographics, Inc. ("ABNH"), a leading global provider of product security and authentication solutions.  Under Mr. Traub's leadership, ABNH's stockholder value increased by more than 1,000% culminating in the acquisition of ABNH by JDS Uniphase Corp. ("JDSU"), a leading global provider of technologies for communications, brand enhancement and authentication, in February 2008.  Following the acquisition, he served as Vice President of JDSU through September 2008.  He has served as a director of iPass, Inc., a leading provider of enterprise mobility services, since June 2009.  He is also Chairman of the Board of Omnego, Inc., a privately-held supplier of mobile cards, coupons and tickets.  Mr. Traub brings significant operational, financial and leadership experience from his roles as a senior executive of various companies, including ABNH where he managed an extensive turnaround and orchestrated its sale to JDSU.  He brings a wealth of board experience and corporate governance awareness from his current and past service as a director of various public and private companies.  

Howard Lefkowitz - From 2001 until August 2010, Howard served as President of Vegas.com, the world's most visited city travel website.  As President of Vegas.com, Mr. Lefkowitz started with a 19-person team and a content-based model website with approximately 100,000 monthly, unique visitors and re-engineered it into the most visited city website with more than 2.5 million visitors each month, 400 employees and a transaction based business model.  By offering hotels, shows, nightclubs, restaurants and golf, among other entertainment opportunities, to customers online, Vegas.com became one of the largest sellers of tourism products for the City of Las Vegas.  In addition, Vegas.com provides back-of-the-house systems, including concierge systems, payment gateways and showroom box office systems, to many of Las Vegas' largest hotels.  Mr. Lefkowitz has over 25 years of marketing, brand development, travel, e-commerce and interactive retailing experience from his role as an executive of numerous e-commerce and technology companies and a unique perspective of the Las Vegas entertainment industry from his work at Vegas.com.  

Mark D. Stolper - Mark has served as the Executive Vice President and Chief Financial Officer of RadNet, Inc. (NASDAQ: RDNT), a publicly-traded provider of diagnostic imaging services, since 2004.  Initially, as a director of RadNet, and then as an executive officer since 2004, he has assisted the company in growing revenues from $137 million in 2004 to over $570 million for the 12 months ended March 31, 2011, raising over $1.2 billion of capital and completing over 30 acquisitions.  An investor who had purchased RadNet stock on the date Mr. Stolper became Chief Financial Officer would currently have an over 600% return on his or her investment.  Since April 2010, he has served as a director of Metropolitan Health Networks, Inc., a publicly-traded healthcare services provider to Medicare Advantage beneficiaries.  Since May 2007, he has served as a director of CompuMed, Inc., a publicly-traded medical informatics and software company.  From 1999 to 2004, Mr. Stolper was a partner at Broadstream Capital Partners and West Coast Capital, merchant banking firms focused on advising middle market companies engaged in mergers and acquisitions.  Mr. Stolper brings significant leadership, financial and accounting experience from his work at RadNet and extensive knowledge of corporate governance practices from his service on the boards of directors of multiple publicly traded companies.  

Gregory Bettinelli - Greg has served as the Senior Vice President of Marketing at HauteLook, a leader in the online private sale channel, since June 2009.  Prior to joining HauteLook, he served as Executive Vice President of Business Development and Strategy at Live Nation Entertainment, a leading live entertainment and e-commerce company, from March 2008 to April 2009.  Mr. Bettinelli also held a number of leadership positions at eBay, the world's largest online marketplace, including Senior Director of Business Development of StubHub, the world's largest fan-to-fan ticket marketplace, from February 2007 to March 2008, and Director of Category Management, Tickets from March 2003 to February 2007.  Mr. Bettinelli has extensive experience providing consumers with direct access to premium products at discount prices from his work at HauteLook and brings extensive ticketing experience from his service at Live Nation Entertainment, StubHub and eBay.  He also has significant e-commerce, interactive and mobile retailing experience from his roles as an executive of various successful e-commerce and online retailing entities.

Vadim Perelman - Vadim is the founder and Chief Investment Officer of Baker Street Capital Management, LLC, an investment management firm whose philosophy is modeled after partnerships managed by Warren Buffett from 1956 to 1969.  Prior to founding Baker Street in 2009, Mr. Perelman was a senior analyst at Force Capital Management, a fundamental value-focused investment fund.  He brings significant investing and capital markets experience that may be valuable in addressing the Company's financial and business needs.  

OUR NOMINEES HAVE A SPECIFIC VISION FOR MAXIMIZING STOCKHOLDER VALUE

In addition to maintaining and growing Tix's relationships with its partners, our nominees would immediately strive to implement a strategy with a view towards improving results.  If elected, our nominees would, consistent with their fiduciary duties, explore the following actions:

• evaluate all strategic alternatives available to Tix, including a full and fair process to sell the Company or other means to return significant capital to stockholders.
• reduce any significant operating costs and expenses deemed to be unnecessary, including the closure of Tix's California headquarters and consolidation of all activities in the Las Vegas offices.
• aggressively pursue incremental revenue opportunities by better monetizing Tix's significant customer traffic and transaction volumes in Las Vegas.
• expand complementary, high-margin product lines that do not require significant capital investment.
• implement a management compensation system that is heavily weighted towards pay for performance, thereby fully aligning the interests of Tix directors with the interests of Tix stockholders.

WE INTEND TO PRESERVE AND GROW TIX'S RELATIONSHIPS WITH ITS PARTNERS

In its June 30 letter, Tix claims that its core business depends upon long-standing relationships in the Las Vegas community between current members of management and the Company's business partners.  Tix warns that if these relationships are severed as a result of our efforts, your entire investment could be lost.  We urge you to disregard these scare tactics!  We are well aware that these relationships may be important.  We are confident that our director nominees, who were selected for their extensive ticketing, marketing, e-commerce and finance experience, would not only cultivate but expand these relationships.  Recognizing the importance of these relationships, we specifically included Howard Lefkowitz in our slate due to his success in building Vegas.com (a business similar to Tix) as its President and his extensive network of contacts with existing and potential Tix partners, including Las Vegas show producers, hotels, restaurants, and landlords.

DO NOT ALLOW THE TIX BOARD TO DIVERT YOUR ATTENTION AWAY FROM THE SERIOUS ISSUES FACING THE COMPANY

In its June 30 letter, Tix fails to address many of the corporate governance issues we have raised, such as the share escrow arrangements, bylaw amendments, and implementation of the "poison pill".  Instead, Tix went to great lengths making underhanded personal attacks against Baker Street in a diatribe that we believe contains serious misrepresentations of the facts.  Do not be fooled by any attempt by the Tix Board to cloud the issues that are relevant to this election.  Consider the following statements made by Tix in its June 30 letter:

WE URGE YOU TO SEND A STRONG MESSAGE TO TIX THAT THE INCUMBENT BOARD MUST BE HELD ACCOUNTABLE FOR ITS ACTIONS BY VOTING "FOR" OUR SLATE OF DIRECTOR NOMINEES.  DISREGARD ANY PROXY MATERIAL OR PROXY CARDS YOU MAY RECEIVE FROM THE COMPANY.  You will soon be receiving our proxy material and proxy card, at which time we encourage you to vote promptly for our nominees.  We are counting on your support to maximize value for all stockholders.  

If you have any questions, or need assistance in voting your shares, please call our proxy solicitor, Okapi Partners LLC, whose contact information is below.  Thank you in advance for your support.

Sincerely,

Vadim Perelman

ABOUT BAKER STREET CAPITAL, L.P.

Baker Street Capital, L.P. is a value-focused investment fund modeled after the partnerships managed by Warren Buffett from 1956 to 1969.  Baker Street Capital, L.P. is headquartered in Los Angeles, California.

SOURCE Baker Street Capital, L.P.