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Buffalo Wild Wings and its activist investors are fighting over this stock chart

  • Hedge fund Marcato claims that Buffalo Wild Wings made an "astronomical error" in an SEC filing
  • B-Dubs stands by its proxy statement, citing methodology used by Research Data Group
Buffalo Wild Wings
Source: Buffalo Wild Wings

The battle between Buffalo Wild Wings and activist investors at Marcato Capital Management continued to rage on Tuesday after the hedge fund accused the chicken wing chain of making an "astronomical error" in a SEC filing.

In a statement Monday, Marcato said that B-Dubs had falsely stated in a chart that the company's shares had outperformed the S&P 600 Restaurant Index over a five-year period ending Dec 25, 2016. According to Marcato, the shares had actually underperformed the index by more than 60 percent during the period.

Buffalo Wild Wings stands by the claim it made in the proxy statement according to methodology used by Research Data Group, the third party it hired to run the numbers.

"The [Total Return Comparison Graph] included in the Proxy Statement was provided by [Research Data Group] based on methodologies that we understand RDG has used throughout its history."

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

"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, on Monday.

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

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 Buffalo Wild Wings CEO Sally Smith to resign. Buffalo Wild Wings defended Smith's performance, saying she has helped generate huge returns for shareholders.

Here's the full statement from Buffalo Wild Wings about why it stands by its third-party performance claims:

"The [Total Return Comparison Graph] included in the Proxy Statement was provided by [Research Data Group] based on methodologies that we understand RDG has used throughout its history. RDG's methodology for sub-indexes like the S&P 600 Restaurant Index is to use the constituents of the sub-index as of the last day of the subject company's fiscal year. Consistent with SEC rules, RDG then calculates the total return of those companies over the preceding five-year period, rebalancing the portfolio once per year (based on market capitalization at December 31) and including newly public companies as of the first day of the year following their IPO. We understand that this methodology has been consistently employed across RDG's client base for any industry sub-index or peer- or custom-index."

"We stand by the accuracy of the Chart in the Buffalo Wild Wings proxy statement, which was prepared in accordance with our usual practice and in a manner compliant with SEC rules," RDG said in a statement. The firm declined to comment further.