Charlotte’s Web founders maneuver to force board shakeup amid fiscal woes

LOUISVILLE — Jesse Stanley and Joel Stanley, the brothers who founded CBD brand Charlotte’s Web Holdings Inc. (TSX: CWEB), are pleading with shareholders to block the appointment of four board of directors nominees and install the Stanleys and two others instead. 

In a Monday letter, the brothers, on behalf of a group of “concerned shareholders” that own nearly a quarter of Charlotte’s Web shares, said that they are moving against the nominees because the company’s stock has plummeted 95% since they departed the board in 2021. Additionally, “revenues have decreased by 22.8% (from approximately $96 million in 2021 to approximately $74 million in 2022) and the value of the company is at its lowest levels since going public,” the Stanleys said.

Boulder-born Charlotte’s Web’s “significant cash burn rate with decreasing revenues must end immediately. The current leadership blames general industry decline and regulatory headwinds to avoid taking responsibility for their actions,” the letter said. “The truth is that the actions of this board have clearly contributed to the destruction of shareholder value.”

The Stanleys accuse company leadership of “uncontrolled spending without consequences,” “failure to maximize potential,” “poor hiring practices” and “lack of accountability.”

The nominees the Stanleys hope to block are John Held, Jacques Tortoroli, Thomas Lardieri and Alicia Morga. Should shareholders decide at their general meeting on Thursday to follow the Stanleys’ lead, Lynn Kehler and Angela McElwee would join the brothers in replacing the current nominees. Kehler is CW’s former chief financial officer, and McElwee is a former executive with Gaia Herbs Inc..

“Without urgent action today, the future of Charlotte’s Web is at risk. We call on the Charlotte’s Web Board and the four incumbent directors, who will fail to achieve majority support, to put shareholders first and to do the right thing by stepping down and avoid delaying change,” Joel Stanley said in a statement. “Shareholders have seen the value of their investments collapse and the stock price is trading at an all-time low. The company is in need of a refreshed board and we have the right people to take on the huge challenges that lie ahead, in order to restore shareholder value.”

If the board is reshaped, the Stanleys claim that Charlotte’s “will return to its roots of deeper engagement with industry and consumers, focus on regulatory action requirements, and improve cost structures. The Concerned Shareholders believe that innovation of new products and product categories should have been the company’s priority over the past four years and that the company’s existing resources must be deployed with far more calculated strategies from here forward.”

Among the “concerned shareholders,” the Stanleys said, is Major League Baseball, with which CW inked a sponsorship deal with Major League Baseball, making it the first CBD company to partner with a professional sports league. Simultaneously, the company launched a line of sports products starting with Daily Edge, a CBD tincture that underwent strict testing and was uniquely designed to adhere to MLB’s banned substances policy.

In response to the Stanleys’ letter, Charlotte’s Web’s board Tuesday said in a news release that “Joel and Jesse’s demands generally, and the timing specifically, are ‎designed to circumvent the procedures and processes in place to protect shareholders and allow them to make an ‎informed decision with respect to the election of directors.”

A board shakeup 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,” the release said. “Such procedures are designed ‎to, among other things, protect shareholders from conflicts of interest.‎”

The existing board members’ release did not specify those alleged conflicts of interest.

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