I can attest from personal experience and conversations with HR leaders that troubled companies overpay for senior executives for the simple reason of being a troubled firm. One company offered a friend of mine a 50% increase in salary and bonuses that would take her to more than $1M a year and, here is the funny thing, she then moved to another firm and then another struggling firm having garnered the reputation of being a fixer. (She said that the firms were beyond fixing.) All three of the firms still limp along and she has retired with a seven-figure bank account. I expect that Ward is feeling good knowing he will earn double while waiting for Elite to hit. I feel good because Ward is gone. Which is a nice segue to my next point…the new CFO.
My initial reaction when looking at his academic credentials was this guy was likely from a blue-collar family and worked his way through college. Some observations of his schools are they are second tier. As someone who has taught in top-tier business schools I admit to being unimpressed but that is academic snobbery. The reality is MBA programs can be assessed for value by determining if they are accredited by AACSB International. The process used for the accreditation is rigorous and selective. Here is the fact: AACSB Accreditation represents the highest standard of achievement for business schools worldwide. Less than 5 percent of the more than 16,000 schools worldwide granting business degrees have earned AACSB Accreditation. Marc Bregman went to the New Jersey Institute of Technology Martin Tuchman School of Management, which is AACSB accredited. So, the guy has a quality MBA.
Second, I see no mention of Bregman having worked at a top four accounting firm – Ernst & Young; which he did. To help understand that there is this…
Ernst & Young Global Limited, commonly known as Ernst & Young or simply EY, is a multinational professional services network with headquarters in London, England. EY is one of the largest professional services networks in the world. Along with Deloitte, KPMG and PricewaterhouseCoopers, it is considered one of the Big Four accounting firms.
Of paramount importance is the company Bregman was controller at – Langan – which is more than 50 years old and is a sophisticated engineering and environmental consulting services firm that works in support of land development projects, corporate real estate portfolios, and the energy industry on a global basis. Their clients include developers, property owners, public agencies, corporations, institutions, and energy companies around the world. Langan ranked 53rd on the ENR Top 500 Design Firms list, as well as #10 on ENR New York and #30 on ENR California Top Design Firms lists.
To be the controller of this firm would require a level of accounting sophistication that means Bregman would not make the mistakes that Ward did. In fact, his experience suggests Nasrat was looking for someone to “keep score” accurately. Is he “the guy” to help take Elite to the Nasdaq? Indirectly, yes. By ensuring all the accounting and financial reports are accurate and up to date. In truth, outside consultants would have always been part of any equation involving Elite getting to the Nasdaq. Does it matter that Bregman does not have pharma experience? No, it is not about industry experience, that is something he will get in fast order. Rather, it is about the functional capabilities he possesses.
A few more comments before I end…
Much has been made about Nasrat’s share count. Without getting into the weeds, let me just nail down a top-line statement, born of a little research…
When Nasrat began with Elite his share count in 2013 totaled 21% of A/S. Fast forward past all the noise about Nasrat total share count and how it has gotten so large that he will sell the company for a nickel and make millions while shareholders will be punished. Nonsense. I went through the 2020 10K to determine that Nasrat’s share count as a percentage of A/S and it is…18.6%. Which requires that I offer two more succinct points that I have made before…
First, any M&A is based on a third-party evaluation of the company. That is necessary to avoid one side over-pricing the firm and the other side under-valuing the firm. The share price is not nor is ever a factor in valuation. What is material is that Elite is profitable.
Second, Elite is not going to conduct an R/S to get to the Nasdaq at this point. If they wanted to do that, they would have done it long ago and there would not have been the need to ask for an increase in A/S.
Third, please let me see all the hands of those who have spent time working with people that occupy the C-Suite. Anyone? Anyone? Bueller???
While I am waiting, let me provide my perspective born of experience with having done exactly that. Nasrat lacks nothing in the ego department. We all remember the “No one can stop us!” statement. I will suggest that no one has stopped them, they just needed to adapt to the external environment – as required – and they did with the much-described pivot to CNS drugs and now, with Lapree and Groner to help, we will see further drug development. Still, Nasrat displays ego and confidence, all very common in the CEO role. After all, we want confident CEOs. But it is the ego that makes me comfortable that Nasrat will not sell or merge Elite for chump-change. In his mind, he has set a basement price and he will work to get Elite to the point that – in an M&A scenario – Elite’s shareholders are rewarded as he believes they should be - reflective of a profitable company.
