Baker Street Capital sells stake in trucker

1.4 million USA Truck shares shed

One of USA Truck's largest shareholders has sold its stake in the Van Buren-based company, but Chief Financial Officer Michael Borrows said Thursday that Baker Street Capital Management's departure will not affect day-to-day operations.

Baker Street, a Los Angeles-based firm managed by Vadim Perelman, sold 1.4 million shares as part of a public secondary offering that closed Wednesday. The offering also included 600,000 of the 1.55 million shares owned by Stone House Capital Management of New York.

"It doesn't really change the dynamics in terms of our strategy or what we're doing moving forward," Borrows said. "That's going to continue. What it might do is it provides probably some additional liquidity out in the marketplace. There's more diversity in our shareholder base."

The closing wrapped up a three-month process which began when USA Truck agreed to register for the sale of 2 million shares for its largest shareholders. The firms had been joined together as Shareholders for the Benefit of USAK, combining to hold 2.95 million shares and a 28 percent stake.

The group's influence was evident when, at its request, Perelman was added to USA Truck's board of directors along with Tom Glaser, who is now chief operating officer with chief executive officer John Simone undergoing treatment for lung cancer. Perelman resigned from the board Wednesday, following through with an agreement that stated he would step down if Capital Management's stake in the company -- which was at 13.3 percent -- fell below 10 percent.

Borrows said USA Truck had a "really good relationship" with Baker Street and Perelman, who did not respond to an interview request Thursday. The company agreed to facilitate the secondary offering because of Perelman's position as a member of the board of directors, which restricted how quickly he could sell his stock in the company.

Baker Street purchased its 1.4 million shares for $13 a share in November 2013. It sold the stock for $20 a share in the secondary offering, representing a $9.9 million profit.

"This was really the only way he could get a liquidity event for his portfolio," Borrows said.

There are no plans to fill the opening on the company's board, which was expanded to include Perelman and Glaser last May. Borrows also said he had no knowledge of anyone purchasing enough stock through the public offering to claim a 10 percent or greater stake in the company.

That includes Stone House, which is in position to remain USA Truck's largest shareholder even after reducing its 14.7 percent stake in the company to about 9 percent. The firm still holds 950,000 shares and Mark Cohen, who could not be reached for comment, said in a February news release that Stone House was "happy to remain" USA Truck's top shareholder.

"Stone House is a long-term holder," Borrows said. "I'm not trying to put words in Mark Cohen's mouth, but he believes our stock has a lot of room to run."

USA Truck stock closed trading at $31.13 a share before the registration to sell 2 million was announced Feb. 26. It closed trading Thursday at $23.21 a share. USA Truck stock closed at $14.99 a share a year ago.

Andy Terry, a finance professor at the University of Arkansas at Little Rock, said changes with shareholders can impact the dynamics of a company. Because large shareholders serve as a "monitoring function" there's greater potential for an "agency problem" with reduced stakes.

"It can make it easier for management to do whatever they want without having a shareholder interfere," Terry said.

USA Truck has a wider base of shareholders after the secondary offering closed Wednesday, but Borrows said the emphasis remains the execution of its turnaround plan. The company reported profits of $6 million in 2014, which came after losing $17.6 million in 2012 and $9.1 million in 2013.

USA Truck also reported net income of $1.1 million for the first quarter of 2015. It was the company's first profitable first quarter in eight years.

"From a strategy perspective, we're still laser-focused on continuing to unlock the leverage that we believe is achievable," Borrows said. "We're very bullish on where this company is headed and how it's going to continue to prosper in a foundation of sustainable profitability.

"We've got a momentum that's being realized and a lot of forward motion."

Business on 05/22/2015

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