Safeguard Scientifics, Inc (NYSE:SFE) said it is shifting its strategy and cutting operating costs. This includes laying off 15 people, or 50% of its workforce. The company expects the cost-saving initiative to save the company between $5.0 million and $6.0 million annually.
The Radnor, Pennsylvania-based investment firm said that in addition to laying off around 15 employees, the company will not be investing capital into any new partners. Instead, Safeguard Scientifics will focus is efforts on supporting its existing partner companies. Safeguard has 26 companies in its portfolio and said that while these companies were meeting or exceeding goals, the pace wasn’t meeting expectations. These include well-known tech companies like CloudMine, Inc., Hoopla Software, Inc., and WebLinc LLC.
According to the press release, Safeguard Scientifics, “will consider initiatives including, among others: the sale of individual Partner Companies, the sale of certain Partner Company interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value. Safeguard anticipates distributing to shareholders net proceeds from the sale of Partner Companies or Partner Company interests, as applicable, after satisfying the Company’s debt obligations and working capital needs.”
“With this new strategy in place, we will immediately create a more streamlined organizational structure that will better position us to focus our resources on the highest-return opportunities while generating immediate cost savings,” said Stephen Zarrilli, president and CEO of Safeguard Scientifics. ” We also expect to realize additional savings over time as assets are monetized and resource needs are further decreased.”
Safeguard has not set a timetable for selling the companies or the interest in them.
Investors responded kindly to the news. As of late Friday, Safeguard Scientifics was trading at $12.50 per share, a 13% increase since the company announced its new strategy.
Safeguard is an investment firm that provides capital and relevant expertise businesses in healthcare, financial services, and digital media. It typically steps in at the Series A or Series B rounds, investing about $6.0 million, and then follows up with additional capital as the companies reach milestones. Safeguard’s investments top out at $25.0 million.
During the company’s third-quarter 2017 earnings call, Zarelli said Safeguard likes to take a significant minority stake in companies that have recurring revenue, minimal regulatory risk, and management teams that do not have controlling ownership positions.
“Safeguard Scientifics Announces Change In Strategy And Operations,” Safeguard Scientifics, Inc., January 17, 2018.
“Companies,” Safeguard Scientifics, Inc., last accessed January 19, 2018.