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Second Activist Investor Wages Proxy Battle Against Blucora

Activist investor Engine Capital issued an open letter to Blucora shareholders Monday, seeking three seats on the public company’s board of directors.

Last year, activist investor and advisory firm Ancora launched a public proxy battle with executives of Blucora, the parent company of tax-centric broker/dealer Avantax Wealth Management. Now Blucora faces a second shareholder intent on changing the direction of the firm, as activist investor Engine Capital issued an open letter to shareholders Monday, seeking three seats on the public company’s board of directors.

“We have spent a significant amount of time analyzing Blucora’s assets, business plans, capital allocation decisions, corporate governance and historical performance,” Engine wrote in the open letter. “We have also engaged with Blucora’s leadership to try to better understand why the company has underperformed and failed to deliver meaningful value for shareholders over many years. Unfortunately, our analysis and engagement with leadership have led us to conclude that shareholder-driven change to the board of directors is urgently needed following another year of underperformance in 2021.”

Blucora’s stock price is up about 4.5% over the past 12 months and nearly 3% year to date through Feb. 14, 2022. On Monday, its shares were down 0.05%.

Engine Capital, which owns about 3.7% of Blucora, has nominated J. Andrew Kalbaugh, a former managing director and divisional president of national sales and consulting at LPL Financial; Elisabeth DeMarse, director of Trajectory Alpha Acquisition Corp., Clever Leaves Holdings and Kubient and former CEO and president of TheStreet; and Chris X. Moloney, CMO, chief digital officer and senior executive leader of Chameleon Collective, a management consulting firm.

The firm has also launched a website,, to share its views on the company and communicate with stakeholders.

In a statement responding to the open letter, Blucora said Engine just recently engaged with the company’s executives and first bought shares in December 2021.

“We would have welcomed, and continue to welcome, any input Engine has for us,” the statement read. “In fact, five days ago, the chair of our board reached out to Engine’s principal, Arnaud Ajdler, seeking to have a conversation and offering a meeting with members of the board; Mr. Ajdler responded only today and only after Engine issued its press release.”

Engine had originally nominated four people to the board, including Ajdler. Blucora claims Ajdler’s director candidate questionnaire indicated that he had knowledge of “various material matters” that he would only have gotten from discussions with former directors and officers of Blucora. Ajdler denied those discussions took place, Blucora stated.

“It was Mr. Ajdler’s gross misrepresentations that led our board to both reject Mr. Ajdler’s nomination and question his integrity and suitability to serve as a director on our Board,” Blucora’s statement stated. “Engine, for its part, has now withdrawn Mr. Ajdler’s nomination and continues to make misrepresentations about the extent to which Mr. Ajdler has had substantive conversations with our former directors and officers in advance of launching a proxy fight.”

Principals at Engine say the rejection was “a disappointing attempt to intimidate a major shareholder and undermine corporate democracy," according to the letter. "Blucora accused us of providing an inaccurate response to one question on its onerous 66-page director candidate questionnaire and consequently moved to unilaterally invalidate our nomination of an Engine principal,” Engine said in the letter. “Rather than allow the board to create another self-serving distraction, we have modified our slate to only include three completely unaffiliated nominees. We will continue doing everything in our power to ensure that a contest is squarely focused on the merits and the company’s underperformance. We will not be dragged into the type of gutter-level contest that transpired last year, when Blucora spent millions of dollars on an extremely aggressive campaign to prevent another meaningful shareholder from obtaining board representation.”

Engine argues that Blucora has underperformed its peers over the past one, three-, five- and 10-year periods, including the time period under CEO Chris Walters’ tenure. The shareholder also complains of the company’s bloated overhead and that its TaxAct and Avantax businesses are not achieving their potential. And Blucora’s forward earnings multiple is close to an all-time low, Engine argued.

Last March, Ancora, an RIA recently acquired by Focus Financial Partners, waged a proxy battle against Blucora, arguing that the management team was failing to find promised synergies between Avantax, Blucora's strategic roll-up of tax-focused broker/dealers, including HD Vest and 1st Global, and Blucora's legacy professional tax software business, depressing the stock price. But shareholders ultimately voted to retain existing board members.

In August, Ancora sent a letter to the board of directors, putting more pressure on Blucora to sell its online tax preparation unit, TaxAct.

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