Ammo, Inc.’s largest investor, Urvan Group, wants to take control of the ammunition manufacturer’s Board and boost the firm’s profit through growth in e-commerce of firearms, outdoor sporting and related goods.
Steve Urvan, who owns 17 percent of the Scottsdale, AZ-based company and sits on its Board, nominated seven director candidates, including himself, as stated in his letter to shareholders. The candidates have experience in firearms manufacturing, e-commerce and M&A.
Urvan sold GunBroker.com, a company he founded and ran for over two decades, to Ammo in 2021 and believes the company could reach $1 billion in annual sales by growing its online platform and entering new categories.
The Board nominations come as Ammo announced plans to separate its manufacturing and online marketplace this month, just 16 months after completing the acquisition of GunBroker.com.
Urvan wrote in the letter: “We believe a reconfigured Board can implement a new strategy for evolving Ammo from a conventional ammunition manufacturing business to a diversified, growing and profitable e-commerce platform—ideally resulting in an improved trading price multiple and enhanced value for shareholders.”
Urvan noted that before Ammo bought GunBroker.com, it posted five years of net losses as expenses rose.
Urvan wrote, “The acquisition finally brought the company to profitability thanks to GunBroker.com’s dynamic customer base and sustained cash flows. In fact, during the company’s earnings call for the first quarter of the Fiscal Year 2022, management attributed 70 percent of Ammo’s profit and margin growth to the acquisition, noting that GunBroker.com had “added over $12 million of high-margin marketplace revenue during the quarter.”
Perhaps this is why discussions on online forums indicate the company’s shareholders are confounded by management’s recent decision to unwind the transaction less than 18 months after it closed.
“Many shareholders also appear to believe there have been issues around integrating the acquisition, improving online sales, managing cash, and communicating the company’s long-term value proposition. There seems to be a growing view that these issues have been keeping the company’s share price and valuation multiple depressed. Fortunately, we feel shareholders’ concerns are addressable without unwinding an acquisition that is starting to dramatically improve the company’s performance,” continued Urvan.
Urvan also noted that Ammo’s share price had lagged peers, tumbling 47 percent in the last 52 weeks.
Rival Clarus Corp’s shares fell 18 percent and Vista Outdoors’ stock dropped 29 percent during the same time.
Urvan thinks new directors could assess Ammo’s leadership team, cut costs in its ammunitions segment, focus more on higher growth opportunities in e-commerce, and consider possible acquisitions in related areas, including sporting goods, apparel and collectibles. Ultimately he would also like to separate the CEO and chairman roles, a trend in corporate governance.
Urvan wrote, “In the coming weeks, we look forward to sharing more details regarding our strategy for unlocking the full potential and value of Ammo. We intend to issue a public presentation prior to this year’s Annual Meeting to provide the market with a very clear sense of our plan, tactics and transition planning.”
In response, Ammo issued the following statement:
“Ammo’s Board and management team are focused on executing on our strategy to drive long-term shareholder value. We disagree with many of the assertions and analyses contained in the public comments from Mr. Urvan and will be providing additional information for our shareholders in coming days and weeks. In the meantime, the Board and management team remain committed to ensuring Ammo is operated for the benefit of all its shareholders. We continue to invite all shareholders and other stakeholders to share with us their views and perspectives on these topics.”
