Delcath Systems, Inc. (OTCMKTS: DCTH) is a company that I’ve covered quite a bit over the course of several months. The company caught my attention with their ChemoSAT® treatment. The treatment, a new take on chemotherapy could prove to be big game changer in the oncology space if the company would do the right things. Unfortunately, that’s not what’s going on here. Over the past few days, I’ve received a MASSIVE number of emails from DCTH investors asking for my opinion. To be blunt here, my opinion is that, while the company has a great product, they don’t seem to be interested in doing anything with it, nor doing anything that would be considered positive for their shareholders. At the end of the day, this is why I stopped covering the stock in the first place. Nonetheless, let’s dig in here…
[alert-warning]A Big Kudos To The Team At Delcath.org For Speaking Out![/alert-warning]
DCTH Wants Another Reverse Split
Recently, Delcath Systems filed a DEF 14A with the Securities and Exchange Commission. The company ultimately had two goals with regard to this filing:
- Increased Authorized Shares – The company intends to increase the number of authorized shares to 1 million. That would mean that the company’s authorized shares would double!
- Reverse Split – Also, the company is seeking shareholder approval to move forward with another reverse split. The reverse split would be at a ratio between 1 for 100 and 1 for 500.
At the end of the day, this reverse split shows that management interests continue to be further and further from the best interest of investors. Ultimately, if approved, this transaction will lead to serious dilution, as the company uses these approvals to access further funds at the expense of current shareholders. Unfortunately, management couldn’t be more blatant with regard to their intent to line their own pockets at the expense of investors!
Talk About Lining Pockets
There’s one thing that we know here – DCTH is a company that is currently very far from profitable. At the same time, the executives at the company are paying themselves the types of salaries that we would expect to see if the company was generating massive profits. President and CEO Jennifer K. Simpson Ph.D. is currently earning $589,345 per year. In second place, we have John Purpura M.S., Executive Vice President and Global Head of Operations. He’s raking in a massive $385,384 per year. Finally, we have CFO and Secretary Barbara C. Keck M.B.A. with a salary of $306,034 per year. Wouldn’t one say that’s a little much?
Even if it was the only way in which the executives were lining their pockets, it would be pretty egregious. Unfortunately, the high salaries aren’t the only way the executives are leaching off of DCTH investors. In fact, the company’s balance sheet is riddled with unnecessary expenditures for travel, hotels, and other expenses in the lavish lifestyle of the executives that act as though they run a fortune 100 company!
A Blatant Disrespect To Investors
Now, digging in a bit further here, it’s easy to see that management at DCTH has absolutely NO respect for its investors. Think about it, while management lives lavish lifestyles on massive salaries and corporate expenditures, investors pay the costs as the business continues to fail. Nonetheless, that’s not the end of the disrespect for shareholders.
Let’s dig in here. Most companies will hold earnings calls, letting investors know how the financial standing of the company is in their own words and explaining what they plan to do moving forward. That’s not the case for Delcath Systems. The company hasn’t held an earnings call since 2014! In fact, the company hasn’t even taken the time to issue a shareholder letter that explains even the most basic of items. No, instead of communicating with investors as they should, DCTH management continues to milk them for all they have while avoiding any contact outside of required filings!
Setting Up For Shareholder Reactions
DCTH management knows that they are doing the wrong thing. As a result, the company recently filed an 8-K defining severance packages for executives. Sadly, these packages are plump, including salaries and bonuses for 2 years, payment of salary to the date of termination, payment of COBRA insurance costs, and more. While I don’t know whether the management already has plans to replace themselves or not, or if the company is doomed to fall apart, this moves seems like a last-ditch effort to make sure that these greedy leaders get their hands on every last investor penny that they can!
The Bottom Line
The bottom line here is that, while Delcath has a product that I believe could become something down the line, the management at the company is partying like all the work is already done. With a blatant disrespect for the company’s investors and a seemingly greedy connotation to everything they do, management seems to be using DCTH investors as their personal ATM. At the end of the day, it’s up to you to do your own due diligence. However, I personally wouldn’t touch this stock with a 100-foot ugly stick! If you own the stock and are hoping for something to give before you lose it all, I strongly suggest voting NO and putting the pressure on DCTH.
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