Not such a smart balance at Smart Balance…

May 11, 2010

One of my alma mater’s big claims to fame is that Smart Balance was invented by Brandeis scientists, including one who served as my freshman advisor (before I made the switch to economics). Indeed, Brandeis lists it prominently on its site as a Points of Pride, along with details about Nobel Prize and Pulitzer winners.

Given this deep connection, I couldn’t help but take a closer look at the 8-K that Smart Balance (SMBL) filed late Friday, announcing the departure of its vice chairman/chief operating officer Robert Gluck. As the filing notes, Gluck resigned on May 3, though he’ll stick around through the end of next month, during which he’ll continue to collect his regular salary. And, then, starting on July 1, Gluck will start collecting $1.8 million — in cash — over the next 24 months. In exchange, Gluck will be required to make himself “reasonably available”. He’ll also be required to forfeit 2 million stock options — options that, if we were the type of people who bet on these sorts of things, we’d guess would no doubt be underwater.

Indeed, you don’t have to dig too deep into the filings to see a disclosure in Smart Balance’s proxy about 1 million options held by Gluck “which are exercisable, if at all, only if the closing price for a share of common stock of the Company is at least $16.75 per share for 20 of 30 consecutive trading days; and (ii) 500,000 stock options which are exercisable, if at all, only if the closing price for a share of common stock of the Company is at least $20.25 per share for 20 of 30 consecutive trading days.” Now compare that to Smart Balance’s current price of just over $6 a share and you start to see why Gluck was so willing to forfeit those options for cold hard cash.

Gluck’s departure was part of a wider series of changes at the company as this article notes — changes that the company said would save it $2.7 million annually. That article also notes that Gluck “helped shepherd the acquisition of GFA Brands Inc. and its Smart Balance brand in May 2007”. But since then, the stock has declined nearly 40%, which kind of makes you wonder why Gluck is being bailed out while ordinary investors are stuck with a bitter taste in their mouths.

Image source: Smart Balance

Leave a Reply

You must be logged in to post a comment.