Exclusive-Hedge fund Hestia wants Pitney Bowes to review capital spend, e-commerce segment

© Reuters.

By Svea Herbst-Bayliss

NEW YORK (Reuters) -Hestia Capital Partners LP, which scored big gains on its GameStop (NYSE:GME) bet, is pushing shipping and mailing company Pitney Bowes Inc (NYSE:PBI) to re-evaluate its capital allocation and e-commerce strategy, sources familiar with the matter said.

The hedge fund, which owns a 6.9% stake in the company that leases postal meters and pre-sorts mail for commercial clients, has held talks with Pitney Bowes and has suggested a possible sale of an underperforming segment, two people with direct knowledge of the matter told Reuters.

It is not clear whether Hestia, run by Kurt Wolf, plans to nominate director candidates for election to the company's nine-member board. But Wolf has been in contact with half a dozen potential candidates, one of the sources said, noting the people have held leadership roles at competitors like Stamps (NASDAQ:STMP).com.

Pitney Bowes spokesman Bill Hughes said the company engages in "open and regular communication" with all investors and welcomes "constructive input." "We believe our businesses are very well positioned for future success," he said.

Hestia specializes in picking "deep value assets" that are unloved and undervalued and rose to prominence when it pushed for changes at GameStop long before the video retailer captured the affections of retail investors who pushed the stock to as high as $420 in 2021.

Wolf joined GameStop's board and Hestia ultimately delivered returns of 196% in 2021 as Wolf worked alongside billionaire investor Ryan Cohen to replace the company's management and reshape its strategy.

Wolf believes Pitney Bowes' stock price, which closed at $3.61 on Friday, is trading between 70% and 80% below what its divisions would be worth on a standalone basis, the sources said. In early trading on Monday, it climbed higher before wiping away gains at a time the broader market is down.

The company's share price is down nearly 52% over the last 12 months and down 64% over the past five years. Pitney Bowes, which is headquartered in Stamford, Connecticut, is valued at $628 million.

Wolf has suggested that the board consider selling the Global Ecommerce segment if its results do not improve, the sources said. He has also proposed the company create a board committee focused on capital allocation and strategic planning, like the one he served on at GameStop with Cohen.

Wolf believes Pitney Bowes should focus on cash-generating segments like Presort Services, its mail aggregation business, and SendTech Solutions, its postage meter business. Both have market leading positions and opportunities to grow and increase profits, Wolf has told the company, according to the sources.

Pitney Bowes' Hughes said investments in SendTech and Presort lead to stabilization and indeed potential for growth. "We are seeing positive volume trends and margin growth in our Domestic Parcel network within our Global Ecommerce business."

Securities filings show that Permit Capital, LLC and Miller Value Partners LP, which were also investors in GameStop alongside Hestia, are also invested in Pitney Bowes.