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Ocho Investments Urges Digimarc Shareholders to Take Action

On April 17, 2025, Ocho Investments LLC made a significant move by releasing a letter addressed to the shareholders of Digimarc Corporation, in which it urged its fellow investors to rethink their votes during the upcoming Annual Meeting set for May 7, 2025. Ocho, holding a 5.2% stake in the company, is advocating for a collective stand by shareholders, particularly in relation to the votes concerning the current leadership.

Call to Action

In the letter, Ocho proposed two crucial actions: first, to "WITHHOLD" votes on both CEO Riley McCormack and Chair Kathleen Kool, and second, to "VOTE NO" on the company's say-on-pay proposal. These suggestions stem from Ocho's analysis of the current state of Digimarc's performance and leadership, which they argue is not aligning with shareholder interests.

Concerns Regarding CEO McCormack

The rationale for withholding votes on McCormack is founded on several alarming trends during his tenure. Under his leadership, the stock price has plummeted by 60%, and there has been no growth in revenue per share. Additionally, Ocho has flagged the decline in net Annual Recurring Revenue (ARR) alongside ongoing operational losses. Shareholders have also expressed frustration over the lack of transparent communication from McCormack and management's inability to mitigate employee investments and maintain business operations effectively.

Issues with Compensation Plans

Ocho's letter points out the complications surrounding Digimarc's compensation structures, specifically addressing the say-on-pay proposal. It was highlighted that the company's incentive plan has become misaligned with the interests of shareholders. One significant change involved switching from a compensation metric based on total ARR to one focused on "Gross New ARR Growth" just months before the expiration of a major commercial contract. This change appears to grant executives substantial bonuses irrespective of the company's actual performance, which raised substantial red flags for Ocho and other investors.

Kathleen Kool's Role as Chair

The criticism extends to Chair Kathleen Kool, who was presiding over the Compensation Committee when these changes were implemented. Ocho expressed concern regarding her lack of action in stemming the rapid erosion of shareholder value and cited her unwillingness to engage with significant shareholders unless communicated publicly. They noted her singular choice to reject stock options for her annual retainer, opting for cash instead, which demonstrated a lack of confidence in the company's future.

A Vision for Change

Ocho emphasized that shareholders deserve leadership that can reliably execute strategies yielding tangible results. They articulated the need for an experienced CEO capable of fostering transparent relationships with investors, fair compensation frameworks that align management performance with shareholder interests, and a capable Chair to provide robust oversight.

The full text of Ocho's open letter can be accessed via the link they provided, outlining their recommendations and concerns in detail. Read the full letter.

In summary, as the Digimarc Annual Meeting approaches, Ocho Investments is leading a campaign urging other shareholders to carefully reconsider their votes on leadership roles. Their activist stance emphasizes the critical need for accountability and alignment in corporate governance, aiming to uplift the value and expectations of Digimarc’s investor base.