Pasadena-Based Guidance Software Founder Writes to Stockholders to Help Improve Company

Guidance Software Inc. founder and largest stockholder Shawn H. McCreight has written publicly to fellow stockholders of the Pasadena-based company to ask for their “help in turning this company around.”

Among the steps the stockholders could do to help, he said, is for them to vote for a slate of five new directors during the next annual stockholders meeting next month.

McCreight has filed a definitive proxy seeking to replace most of the current directors, after the board refused to add any of the candidates from his list for the upcoming election. The board election coincides with the annual stockholders meeting on May 11, 2016.

“I am asking for your help to turn this Company around,” McCreight wrote in a public letter released online. “By voting for my slate, the stockholders will receive a fresh start for the Board, proper Company alignment with market opportunities, ethical governance, and a real opportunity to capture the value that we all know lies within GSI’s brand equity, cutting-edge technology and market presence that has been built over the last 19 years.”

In the definitive proxy statement filed with the Securities and Exchange Commission March 30, McCreight and four other stockholders said the company has suffered a huge share price decline resulting, they said, from decisions of the current board.

“The company’s share price has declined by approximately 46 percent during the period from January 2, 2015, the first trading day of 2015, to February 10, 2016, the date on which the nominating stockholder delivered a letter to the Company submitting nominations of five persons for election to the board and a proposal to improve the company’s direct accountability to stockholders,” the statement said. “The per share closing price on March 24, 2016, the last trading day before we filed our revised preliminary proxy statement, was $4.18, a 40 percent decline from January 1, 2015.”

In response, Patrick Dennis, Guidance Software CEO and President, has written to stockholders, through the SEC, to urge them to vote against McCreight’s slate.

“The Board of Directors does not endorse any of Mr. McCreight’s nominees and recommends that you vote against Mr. McCreight’s stockholder proposal and for the election of each of the nominees nominated by the Board of Directors,” Dennis wrote. “The Board of Directors strongly urges you not to sign or return any proxy card sent to you by Mr. McCreight, his affiliates or another party. If you have previously submitted a proxy card sent to you by Mr. McCreight, his affiliates or another party, you can revoke that proxy and vote for our Board of Directors’ nominees and on the other matters to be voted on at the meeting.”

In his letter, McCreight said he founded Guidance Software in 1997 with the goal of creating new technologies to help forensic and cyber-security investigators work with unprecedented power and speed.

“Thanks to the employees of Guidance and the tireless efforts of law enforcement, we and our children are all safer as a result,” McCreight said. “Guidance’s enterprise products now reach over 25 million endpoints, and our software and methods are the gold standard for forensic, cyber-security and eDiscovery investigations worldwide.”

In earlier statements, McCreight has said the company’s share price decline was also caused by changes in the senior management team and the company’s shift in strategy, particularly its “focus away from its core cyber-security products and a series of changes to its product road-map, pricing policies and sales channel strategy.”

He said his recommended slate is a fresh start, with a “balance of engineering, industry, financial and executive experience, to guide the company to success and produce the best outcome for stockholders.”

“Our slate, upon a favorable stockholders’ vote, would give immediate financial guidance to the market,” he said. “In addition, we believe that the stockholders should insist that the company report the results of operations for the first quarter of 2016.”