Slate Tied to Dissident Shareholder Group Wins Seats on OTI Board

A slate of eight director candidates supported by a dissident shareholder group won election on Sunday at a special meeting of shareholders held by On Track Innovations Ltd., a vendor of contactless-payment solutions. The election, which expands the company’s board to 11 directors, hands control over the 22-year-old Israeli company to investors who want to exploit its trove of patents to generate profits and drive up the stock price.

The special meeting on Dec. 30 followed dramatic developments the week before in which company founder and chairman Oded Bashan and his son, president and chief marketing officer Ohad Bashan, resigned. Their resignations are effective next June. The elder Bashan had earlier in the month resigned as chief executive officer, sparking a search for a new CEO.

Led by investor Jerry Ivy, the dissident group has for months expressed dissatisfaction with OTI’s financial performance and share price. The company, which has not turned a profit in its history, has generated a cumulative net operating loss of $90.4 million over the past six years, according to the group. OTI”s stock closed on Monday at $1.42 per share, down from as much as $15 six years ago.

The troubles at OTI follow the failure earlier this year of rival contactless-technology provider ViVOtech Inc. Like OTI, ViVOtech manufactured readers that could be used for contactless cards and near-field communication (NFC) transactions with mobile devices. NFC permits short-range, two-way links between mobile devices and card terminals for payment and loyalty transactions. OTI also makes smart cards.

In a video message issued in support of his slate of director candidates, Ivy refers to OTI’s cache of more than 100 patents as a basis for growth, profitability, and greater shareholder value. “It’s time for the company to be profitable,” he says in the video, while referring to the need to “fully execute on the technology.”

Despite ViVOtech’s liquidation and OTI’s troubles, however, observers don’t see moves such as those taken by the dissident OTI shareholders as a vote of no confidence in NFC, a promising mobile technology that has taken far longer to catch on than most proponents had expected. Instead, the dissidents likely see potential profits in NFC that they’d like to tap sooner rather than later. “They believe NFC is an opportunity but [OTI] needs to exploit it better,” observes Todd Ablowitz, a former ViVOtech executive and now a consultant with Double Diamond Group, Centennial, Colo. “NFC will have its time. It’s still better than anything else I’ve seen.”

Companies like OTI and ViVOtech have also suffered from being early in the slow-moving NFC market. Ablowitz says. “It’s natural that when something takes this long, the early players would really struggle by now,” he notes. “I don’t think dissident shareholder revolts are done when companies are knocking it out of the park.”