Buffalo Wild Wings made 'astronomical error' in materials filed with SEC, says activist investor

Key Points
  • In its latest attack on Buffalo Wild Wings, activist investor Marcato Capital Management said the restaurant chain misrepresented its share performance in definitive proxy materials that it filed.
  • Buffalo Wild Wings stated in a chart that its shares outperformed the S&P 600 Restaurant Index when they actually under performed by over 60 percent, Marcato said.

Activist investor Marcato Capital Management has hit out once again at Buffalo Wild Wings, saying the restaurant chain made an "astronomical error" in definitive proxy materials it filed with the U.S. Securities and Exchange Commission last Friday.

In a Monday statement, Marcato said Buffalo Wild Wings had falsely stated in a chart that the company's shares outperformed the S&P 600 Restaurant Index over a five-year period ending Dec 25, 2016. The hedge fund claimed that the shares had, in fact, under performed the index by over 60 percent during the period.

A chart from the Buffalo Wild Wings 2017 proxy statement as seen by CNBC.

Multiple data sources appeared to confirm Marcato's assertion.

"This kind of sloppy, self-serving 'analysis,' which has gone uncorrected for three full days, including a trading day, is emblematic of what we believe is management's careless approach to assessment of shareholder value. This is an astronomical error and the fact that we need to point it out should make all shareholders question many arguments management has put forth," said Mick McGuire, managing partner of Marcato.

An image published by Marcato alongside its statement on Buffalo Wild Wings.

"How many other mistakes have been made in management's misguided efforts to preserve the status quo? Where is Board oversight? Who on the Board is proofreading management's analysis? Where are the advisors? How much value has been destroyed thanks to sloppy 'analysis' like this? In our view, shareholders deserve board oversight and accountability, which they will get if they elect Marcato's nominees to the Board on June 2, 2017," he added.

Buffalo Wild Wings did not immediately respond to a request for comment.

Marcato, which owns 6.1 percent of the restaurant chain's outstanding stock, has been pushing since July for Buffalo Wild Wings to franchise more of its restaurants and last week called for CEO Sally Smith to resign. In February, the hedge fund nominated McGuire and three other directors to the board, but Buffalo Wild Wings picked only one of Marcato's suggestions.

Buffalo Wild Wings has since defended Smith's performance, saying she has helped generate huge returns for shareholders. The restaurant chain also wrote a letter to shareholders accusing the hedge fund of attacking its board and management team.