Masimo (Nasdaq: MASI) shareholders voted to oust two members of the device developer’s board after a heated battle by activist investor Politan Capital Management.
Masimo has yet to release official results, but acknowledged defeat today in a statement to MassDevice.
“We are disappointed to have lost the valuable contributions of two very qualified and capable board members,” Masimo spokesperson Evan Lamb emailed. “We are committed to continuing to innovate revolutionary products for patients and consumers worldwide.”
Politan Managing Partner and Chief Investment Officer Quentin Koffey and former Johnson & Johnson MedTech executive Michelle Brennan will join the Masimo board.
Koffey and Brennan replace incumbents H Michael Cohen and Julie Shimer, who had the support of Masimo’s management.
Earlier this month, Masimo offered to seat Brennan — but not Koffey — if shareholders supported an advisory vote to expand the board from five members to seven. Masimo today told MassDevice that shareholders voted for that board expansion.
Politan owns around 9% of Masimo stock.
Politan declared victory yesterday, citing analysis from its proxy solicitor, saying “each of Politan’s nominees received at least 70% of the total votes cast, with 17 of the top 20 (and 43 of the top 50) shareholders voting for both Politan’s candidates.”
Those figures exclude voting by company insiders, such as Masimo founder, CEO and Chair Joe Kiani.
Another key result to watch: Shareholders also cast advisory votes on Masimo’s executive pay after voting against those compensation practices last year. Shareholders voted for the latest pay packages as Masismo recommended, Lamb said today.
All this could set up another proxy fight a year from now with Kiani on the hot seat. In the final weeks leading up to the vote, Masimo said it feared he’s the ultimate target.
Analyst reaction to the Masimo board upheaval
BTIG is keeping Masimo as a “buy” but said key questions remain.
“We do not feel we have exact details or timelines on what the activist hopes to accomplish, or whether these efforts will be successful,” analysts Marie Thibault and Sam Eiber said in a note to investors today. “… We understand the frustration with the company’s strategy and the push for improved corporate governance practices. But, we also think it will be important for MASI’s near-term stock performance that the new board nominees can achieve a collaborative relationship with MASI’s management team.”
If the new board members and Kiani can’t work well together, Thibault and her team “worry about the potential for management upheaval, reactions from those few top shareholders that are loyal to management, uncertainty around near-term guidance metrics, and the possible impact of any distractions on commercial selling efforts and R&D.”
BTIG identified five key questions that need answering before the company’s stock stabilizes, including how Kiani will react to the loss and whether two directors are enough to change Masimo’s strategic direction. They’ll also be watching for a spin-out of the company’s consumer business, Sound United, which Masimo bought for $1 billion in 2022.
Finally, Thibault’s team wants to know “how will near-term revenue, spending and margin metrics change as a result of any shifts in strategy” and whether the vote will cause significant attrition or disruption among Masimo’s workforce.
“The best next step is for MASI and the new board nominees to rapidly get on the same page, communicate clear intentions for the corporate strategy, and eliminate uncertainty,” the analysts wrote. “A quick, clear, consistent, collaborative vision would allow investors on the sidelines to feel more comfortable with the MASI story and minimize disruption.”
