The SciQuest SLAPP: The Howard Post Continued by Jon Hansen

Posted on August 25, 2015


Before I delve into the remaining points of SciQuest’s contention with my August 3rd post Assessing former CFO Rudy Howard’s departure: Is SciQuest’s Wiehe looking for true leaders or puppets?, I want to let you know that we are still in the process of trying to upload the entire 26 page document.

As promised, and as soon as it is up in an accessible format, I will share the link with you, because I think it is important that you read what SciQuest is challenging so that you can draw your own conclusions.

In the meantime, let’s continue on point “a” (as well as the other 4 points) from the last post A SciQuest SLAPP . . . A Matter Of An Intended Action?

The preceding post is defamatory of SciQuest in the following respects:

a. The headline poses a false dichotomy that implies that SciQuest’s CEO Steve Wiehe is placing unqualified and incompetent “puppets” in leadership positions rather than “true leaders.”

My Response:

Beyond what was provided in the last post, the reference to puppets was posed as a question. Specifically, “In short, why get rid of a guy of that caliber (referring to Howard), to bring in a former CFO and longstanding “loyal” SciQuest employee, and an executive coach with a finance background . . . puppet positions?”

What is the basis for asking this question? Is it warranted?

Having already established through the website, which was referenced in my previous post, that Howard’s departure was described as being “abrupt,” that it was “obvious that the initiative for the separation came not from Howard,” and that “a comprehensible reason for the separation was not given,” says a great deal. Howard is a top guy who’s qualifications are impressive. During a clearly difficult period for the company, when his expertise is most needed, why is he gone . . . suddenly and without any real explanation?

This is especially troubling given that a CFOs sudden departure raises red flags. In my June 2nd, 2015 post, I referenced the following quote from Jerry Helzner’s article Look for “Red Flags” on Stocks:

“It’s an especially bad sign when a company’s Chief Financial Officer (CFO) leaves suddenly. No one knows more about a company’s financial condition than the CFO.” 

Within the above context, and at this particular juncture in the company’s history and . . . in the absence of a “comprehensible reason for the separation,” what is one to think?

The fact that an InMail from an investment professional, to which I also referred in the previous post (see image), made the statement that SciQuest is a “poorly managed company with a toxic work environment” suggests that there are problems at the management level. What are those problems?

Another message from a reader asking, “Do you have any sense for the Board of directors and whether they are Steve Weihe’s cronies who will do as he wishes, or whether they might realize, hey this isn’t working lets just sell this thing for whatever we can?” is also worth noting.  Why ask whether or not the Board of Directors are “Steve Weihe’s cronies?”

The fact that the above points of concern originate outside of this blog, warrants the question being asked. Unfortunately, and given SciQuest’s continuing unwillingness to step up and address these legitimate concerns, choosing instead to respond by way of a SLAPP document, does not help their position. In short, we are left to assume the worst.

b. The portrayal of Ms. Baker as an unqualified hire falsely implies that SciQuest hires, and is led by, unqualified and incompetent employees, and that SciQuest hires only employees who will serve as its “puppets.”

My Response:

First of all, nowhere within the text did I use the words “unqualified” and/or “incompetent.”

While I would invite you to read the Howard post in its entirety, for the sake of convenience, this is what I wrote about Ms. Baker:

JWH: Not if you look at Kaelin and current VP Finance Lisa Baker . . . who besides finance was most recently an executive life coach?

JWH: . . . and then compare it to departed CFO Rudy Howard . . . see my upcoming Tweet . . . the guy is an M&A warrior, SEC practice specialist and a strong investment banking background . . .

JWH: In short, why get rid of a guy of that caliber to bring in a former CFO and longstanding “loyal” SciQuest employee, and an executive coach with a finance background . . . puppet positions?

I then went on to write:

“No disrespect to Ms. Baker – or for that matter Ms. Kaelin, but the two of them together do not match the experience and expertise of departed CFO Rudy Howard. Especially given Howard’s extensive background in the critical areas of Mergers and Acquisitions, SEC Practice, Investor Relations, Investment Banking and Private Equity.

The fact that Howard, who after leaving a partnership position with Price Waterhouse Coopers in 1995, has been a CFO exclusively for his entire career, speaks volumes.

However it is beyond the resume that you will discover his true value. I am talking about a 2012 interview, in which you get an opportunity to understand the values that define both the man and his work history. Here is the link to that “10 Question” PC World interview.

Even executive coach Baker will have to admit that Howard was a top level executive with an incredible depth of both experience and personal character.”

By comparison, here are the facts regarding Ms. Baker’s background:

  1. Ms. Baker’s LinkedIn profile – the image of which you can view on the Howard post, indicates that she was an executive coach with DeBrine Baker Coaching between August 2010 and May 2015, when she was appointed to the position of VP, Finance at SciQuest.
  2. Prior to DeBrine Baker Coaching, Ms. Baker lists her previous position as being CFO and COO at iCool Technologies between September 2011 and September 2013 – note the overlap between the two positions. While having a US presence, iCool Technologies appears to be based out of India.

You can also check out Ms. Kaelin’s profile in the same post, and my corresponding comment that the “first thing that comes to mind . . . at least my mind, is a loyal employee that I can count on to tow the line in terms of following my direction.”

Again, at no time did use the words “unqualified” and/or “incompetent.”

What I did say is that when you consider Mr. Howard’s impressive background, and compare it to the backgrounds of Ms. Baker and Ms. Kaelin, I would go with Mr. Howard.  Or to put it another way, if I were the President and CEO of a publicly traded company – and yes, I was the President of a publicly traded company per my last post, Mr. Howard is the individual that I would do everything I could to keep on my team.

c. The portrayal of the nature of Mr. Howard’s departure from SciQuest is false, and implies that SciQuest fires “disloyal” officers.

My Response:

Once again, I will refer to the previous post, as well as today’s “point a” response in terms of the portrayal of the Howard departure, and let you you draw your own conclusions as to the accuracy of my assessment.

However, I want to address the “disloyal officers” contention by referencing the following reader comment that came to me via a Skype message:

Reader: yeah, on the face of it… I think Rudy recommended selling, and Stephen was sick of the noise, so replaced Rudy with a “loyal” as you put it – seems petty, and you would never be able to find out the truth, but it kinda makes sense.

They then go on to write:

Reader: An investment adviser asked about Rudy during the Qtr 2 conference call, and Stephen seemed a little thrown. Sounds like Rudy has nothing to do with SciQuest anymore, so you might be able to get some info out of Rudy if you can track him down.

Up until I received the above comments – which I shared openly in the original post I, similar to the sources I have cited, had no clear understanding as to why the CFO left.

That said, the suggestion that “Rudy recommended selling” shares has to – in the absence of a meaningful response from SciQuest, be considered.

Did Rudy want to sell the company? Is the company stuck in terms of market growth? Is there talk about interest in the company?

Regarding the first question, no one – at least at this point – is talking, so it remains open for interpretation.

In terms of market growth, which might be one motive for selling, read the following from investment research firm Zack’s:

“That is why we currently have a Zacks Rank #4 (Sell) on this stock and are looking for it to underperform in the weeks ahead. So either avoid this stock or consider jumping ship until the estimates and technical factors turn around for SQI.”

The above referenced excerpt is from an article that appeared in the Zack’s website on May 20th, 2014.

Fast forward to July 29th this year, and note my following Twitter exchange with Zacks:

SciQuest Zacks

It is worth noting that this past Friday, August 21st, American Banking & Market News reported that SciQuest (NYSE:SQI) was downgraded by Zacks from a “hold” rating to a “sell” rating.

Here we are more than a year down the road from the May 2014 Zacks article, and Zack’s position seems to be in line with the investment professional’s lament that SciQuest “can’t seem to grow.” Is it reasonable to conclude that the company might be stuck? If the company is in fact stuck relative to market growth, is selling a viable option that a CFO might want to pursue?

Traditionally, and in my experience, CFOs are realists or numbers driven, while CEOs are visionaries who will stay the course. Given the present situation at SciQuest, if you were a CFO, what would you do? What would you do if you were a CEO? Might this be a point of contention that leads one to leave?

SciQuest Stock Graphic Aug 2015

Of course, any discussion surrounding the sale of the company would be moot if no one is interested in buying.

With regard to this last question, as well as the remaining points of SciQuest contention, I will address those in my next post.

In the meantime, reflect on the above and tell me what you think.

As I said before, I am simply seeking the truth. Admittedly, it is most difficult to get to the truth, when one party has either remained silent or given you a SLAPP. That said, the invitation to SciQuest, and in particular Stephen Wiehe to do an interview remains, as always, open.

You can follow my coverage of this story on Twitter using the hashtag #SQSLAPP.