David Tepper, billionaire founder of the hedge fund Appaloosa Management, sent a very strong letter to Whirlwind’s board of directors, accusing the appliance maker of destroying shareholder value and calling for radical changes in its strategy.
Tepper said in the letter that he observed with “some astonishment” the company’s issuance of equity, which he called significant and unnecessary shareholder dilution. He argued that the cost of the capital raise was more than 10%, well above the company’s tax-adjusted cost of debt, less than 5% in the public markets, despite management’s stated goal of reducing leverage.
“Over the years, this management team has destroyed hundreds of millions of dollars in shareholder value. Enough is enough. There can be no more excuses,” Tepper said in the letter, first obtained by CNBC. Andrew Ross Sorkin.
Whirlpool, the maker of Maytag and other iconic American appliance brands, was the eighth-largest holding in Appaloosa Management’s portfolio at the end of the fourth quarter, worth $282 million, according to Verity data.
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Whirlpool shares fell 14% Tuesday amid the secondary stock sale, which will raise $454.9 million through a common stock offering and $508.1 million through a depository stock sale, according to the company. Whirlpool also sold 435,000 shares of Guangdong Whirlpool Electrical Appliances at a discounted price of $69 per share in a private placement.
Whirlpool shares were down less than 1% in morning trading after Tepper’s letter was released. The stock is down nearly 36% from its 52-week high in July.
A Whirlpool dryer is on display at a Wilson AC & Appliance store in Austin, Texas on April 26, 2024.
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The hedge fund manager also criticized Whirlpool for failing to take advantage of tariffs instituted under the Trump administration, saying the company should explore partnerships or potential mergers with disadvantaged foreign competitors to strengthen its strategic position.
“We encourage the Board to (i) remember its fiduciary responsibilities and not accept that management acts solely in its own interest, and (ii) invite domestic entities or foreign companies that wish to
create U.S. jobs and increase shareholder value for interest in Whirlpool,” the letter said.
Whirlpool did not immediately respond to CNBC’s request for comment.
