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Open Letter To CVSL's John Rochon
Jul. 28, 2015 9:32 AM ET | About: CVSL Inc. (CVSL)
Disclosure: I am/we are long CVSL. (More...)
Summary

http://seekingalpha.com/article/3363415-open-letter-to-cvsls-john-rochon?auth_param=iof3p:1arf13s:0908ca2ff68693f840f9be5dd8f3c7aa&uprof=51

Create Long Term Value For Shareholders By Helping Sales Reps Become Shareholders.
Implement While The Stock Is Still Dirt Cheap.
No Stock Buybacks Until The Sales Reps Get To Buy Shares.
Dear Mr. Rochon,

I have seen and heard great things regarding the rebirth of the Longaberger brand from several who were in attendance at the Bee
convention over the weekend. Congratulations on successfully facilitating a new sense of excitement among the entrepreneurs in
attendance and setting the stage for the iconic Longaberger brand's return to prominence. The entire feeling around the convention seemed to be an extension of the other steps taken by CVSL (NYSE: CVSL) over the last few months - where you have rightfully shown great respect for the entrepreneurs (sales reps) whose hard work, drive and passion will ultimately determine the success of Longaberger. I applaud the operational changes (like closing the retail outlets) that have been made to ensure that they remain the focus going forward.

The purpose of this letter is to encourage you to consider going farther down that path and refrain from stock buybacks of any kind until you have given the entrepreneurs/sales reps at all of the CVSL owned companies the opportunity to buy shares while the stock is trading at these ridiculously low prices. And by opportunity to buy shares I mean create some program ( like the Agel Family Prosperity Plan, an ESOP or a DRIP) where all CVSL company sales reps can earn stock and/or invest in CVSL shares with little or no transaction costs and make it happen ASAP while the stock is still trading this low. While this would be a fairly significant departure from what most publicly traded company executives often do, I think it is fair to say that CVSL is a very unique company that is uniquely focused on creating value by empowering its sales force. Such a step would be in keeping with the spirit we just saw exhibited at the Longaberger convention in Dresden and I believe that shareholders would see a very long term positive impact if such steps are taken.

Given that you have enough cash on the balance sheet to repurchase the entire CVSL public float at a significant double digit premium to its recent trading range, it would not be unusual for the CVSL board to authorize a stock buyback program or even pursue a Dutch Auction Tender Offer to take down as many shares as possible while the stock is trading at such ridiculously low prices.

The company could obviously make an attempt to buy back 5 or 6 million shares of the 11 million share float without impacting our
operations in a significant way. Additionally, CVSL's stock price (even with last week's move off the bottom) remains at a level that
equates to a valuation that is within the target range for which you have sought to acquire other companies (.10x to .20x trailing twelve
month's revenue). It was pointed out to me following the publication of the article last week that my trailing twelve month figures failed
to include the recently acquired Kleeneze operations, which were obviously only a part of CVSL for the last four months, but they will be part of CVSL going forward so they should be considered when figuring trailing 12 month revenue metrics. Thus, with $180million in
trailing twelve month's revenue, CVSL's current cash/debt adjusted market cap of $35 million equates to just under .20x trailing twelve
months revenue vs. most publicly traded players in the space trading at a valuation 5x that much - a full 1x revenue. Thus, no one could
fault you or the CVSL board if you chose to buy back stock at these levels, but why not take this opportunity to affirm that we believe
the best investment CVSL can make as a company is to invest in the growth of our sales reps?

I submit to you that there is greater long term value for shareholders in the scenario where 10,000 CVSL company sales reps buy 500 shares of CVSL stock instead of several hedge funds or institutional investors combined owning those 5,000,000 shares. While I am sure that many reps will buy significantly more than 500 shares and we might end up with an even greater number of participants than 10,000, the point is that owning a stake in the parent company will give each rep an even stronger incentive to push for greater achievement, be more productive generally and encourage the same from their fellow owners. Sales rep / shareholders will be unlikely to dump the stock in en masse like institutions can and are not forced to sell their shares due to share redemptions that occur in market downturns. There are plenty of other sorts of situations where an institution may sell their CVSL shares where a sales rep/owner would not. Additionally, consider how much more motivated and loyal would a sales rep be if he owned stock that was already worth 400%-500% more than what he paid for it, a gain that could be realized if CVSL simply trades up to the average revenue multiples of the other conpanies in the direct sales space.

In summary, I respectfully request that you and the board give due consideration to creating a program that allows sales reps at all CVSL owned companies the opportunity to become owners of CVSL through stock purchases or awards while the stock is so cheap and still trading so far below the valuations of other companies in the direct sales space.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Additional disclosure: My intent in publishing this article is to inform investors about developments related to CVSL. I did not and do not intend to suggest any specific action by any investor or shareholder and strongly suggest that any decision made to buy or sell shares of this stock be made after consultation with an investment advisor as to the suitability of such an investment. I currently own shares of CVSL outright and in some managed accounts. I may buy or sell shares at any time based on market conditions and the trading price of CVSL.