#United States #Miami #InMode Ltd #DOMA Perpetual #Moshe Mizrahy

DOMA Perpetual Pressures InMode's Board on Buybacks

In a significant move that emphasizes shareholder interests, DOMA Perpetual Capital Management, a major stockholder in InMode Ltd., recently made public its plea to the company's Board of Directors. The firm is advocating for the immediate resumption and acceleration of InMode's stock repurchase program as a means to bolster long-term shareholder value. The letter sent to the board also calls for a change in leadership, specifically urging the removal of CEO Moshe Mizrahy, whose management strategies have come under scrutiny amidst a period of declining stock prices.

InMode Ltd., which has been dealing with a depressed market valuation, has seen its stock price tumble over the past year. DOMA Perpetual's communication highlights the financial repercussions linked to Mr. Mizrahy’s tenure, particularly his public remarks regarding the company's capital allocation strategies. The firm contends that Mr. Mizrahy has mischaracterized the purpose of share buybacks, suggesting that they do not serve to enhance stock prices in the short term but are aimed at creating enduring value for shareholders.

Concerns on Capital Allocation

DOMA Perpetual outlined its concerns regarding the company's capital allocation strategy, particularly pointing to the apparent disconnect between Mr. Mizrahy's comments on buybacks and the expectations of investors. It expressed that his approach has been detrimental, characterized by antagonistic management practices and inadequate financial outcomes. The firm admonished the CEO for his latest remarks, where he suggested that past buybacks failed to positively impact the stock price, thus undermining the strategy behind such actions.

In their letter, they stated, "The value and purpose of these buybacks are foundational to long-term value creation, a significantly different approach from short-term stock price movements. Mr. Mizrahy's handling of these communications is concerning and does not reflect sound leadership."

Measures to Address Shareholder Value

In light of the concerns raised, DOMA emphasizes the need for the Board to take immediate action. It has urged the reinstatement of the share repurchase program, which had recently been postponed. The company currently holds approximately 60% of its market capitalization in cash, with the lack of movement on buybacks raising alarm among shareholders.

Furthermore, the letter calls for enhanced oversight from the Board to ensure that the current management aligns with the best interests of shareholders. It posits that even with a robust cash position, the absence of a buyback program inevitably leads to decreased earnings and returns for investors. DOMA asserts that any cash in the company's balance sheet should work towards delivering value back to investors, and that repurchasing shares during periods of undervaluation presents an effective strategy to shore up business performance.

The Need for Leadership Change

The communication from DOMA does not stop at financial strategy; it highlights a pressing need for a change in leadership at InMode. With recurring guidance downgrades since Q3 2023 and the controversial dismissal of key personnel in the U.S. market, DOMA expresses skepticism regarding Mr. Mizrahy's capability to lead the firm back to growth. They believe a capable leader is essential to harness the potential of InMode’s offerings, which include breakthrough medical technologies and a strong market presence worldwide.

The firm maintains that Mr. Mizrahy’s neglect of alternate manufacturing avenues, which could ease potential risks and operational costs, showcases a narrow-minded approach that has not served shareholders well. They stress that InMode’s valuation, particularly when factoring in cash reserves, does not correspond with the reality of the company's robust inventory, distinctive IP, and significant recurring revenue streams.

Conclusion

In conclusion, DOMA Perpetual's letter not only emphasizes the urgency of resuming share buybacks but also signals the necessity for strategic change within InMode's leadership. As the Board contemplates these recommendations, the focus remains on enhancing shareholder value while ensuring that the company realigns its operational strategies for sustainable growth in a competitive marketplace. The path forward will require decisive action that addresses these fundamental concerns to restore confidence among investors and improve the overall health and valuation of InMode Ltd.