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Carlo Cannell's hedge fund Cannell Capital filed a 13D on shares of Hooper Holmes (HH).  They've disclosed a 14.24% ownership stake in the company with 9,946,766 shares.

The activist 13D details that Cannell was out buying in mid-August at prices between $0.36 and $0.38.  Carlo Cannell then attached a letter to the board as well with comments.


Cannell's Letter To Hooper Holmes

"Mr. Ronald Aprahamian
Chairman of the Board
Hooper Holmes, Inc.
170 Mt. Airy Road Basking Ridge, NJ 07920 

Dear Mr. Aprahamian, 

Cannell Capital LLC ("CC") writes today with several suggestions and comments for Hooper Holmes, Inc. ("HH"), the common equity of which CC, or accounts managed by CC, owns 14.2% as of September 30, 2013. 

First, in our opinion, the size and remuneration of the Board of Directors ("BOD") is too large.  The $73,000 to $104,000 each non-executive member has received per annum as the stock price has slid from $17.43 in April 2000 to $0.36 in August 2013 is galling.  We estimate aggregate cash compensation of $1.0 million for its six directors.  That is simply not reasonable (see Exhibit "A" enclosed).  Given the pro forma size following the divestiture of Portamedic, which we reckon should decrease revenues 60%, we call for the removal of Elaine Rigolosi for two reasons (i) as Chair of the Compensation Committee she is culpable for the egregiousness of compensation over her 25 terms; (ii) she is in our opinion less qualified than other new members of the Board. 

Second, the BOD should "downgrade" the auditor of HH. The $593,000 that KPMG LLP received last year is excessive given the current manifestation of HH. As part and parcel of this downgrade we call for the BOD to effect a reverse stock split sufficient - amongst other measures - to effect in a Form 15 filing a notice of its intent to "go dark." (Here is list of pros and cons for which we suggest for illustrative purposes: http://www.andrewskurth.com/pressroom-publications-126.html ). 

Lastly, we wish to congratulate HH for negotiating the sale of Portamedic. Our 2015 forecast of the Health & Wellness segment, now unencumbered by the Portamedic "cancer", is as follows: 

(FY Dec, $ Million)             Good            Great
Health & Wellness Growth  20%             25%
Revenue                                $72              $78
Net Income                           2                  4  


We are gratified by the recent progress.  We think the current pro forma enterprise value of $12 million is a paltry price to pay for a growing and good margin business, now liberated from the musty legacy business.  Combined with continued and robust reduction of superfluous expenses, we believe this "phoenix" could yield over $8 million in cash flow from operations in the next couple of years.  This would imply an attractive high-double-digit-percent return should a strategic buyer become interested in this growing niche - an outcome for which we both foretell and hope. 

Sincerely, 
/s/ J. Carlo Cannell
Managing Member"


About Hooper Holmes

Per Google Finance, Hooper Holmes is "engaged in providing health risk assessment services to the life insurance and health industries Hooper Holmes operates in one business segment and provides paramedical and medical examinations, personal health interviews and record collection, and laboratory testing, which help life insurance companies evaluate the risks associated with underwriting policies. It also conducts wellness screenings for wellness companies, disease management organizations and health plans. The Company's core activities consist of arranging for paramedical examinations on behalf of insurance carriers, primarily in connection with such carriers’ processing and evaluation of the risks associated with underwriting insurance policies - mainly life insurance policies. In October 2013, the Company sold its Portamedic service line to American Para Professional Systems, Inc."


Hear Cannell's Latest Investment Ideas

Carlo Cannell will be presenting his latest investment ideas at the Las Vegas Value Investing Congress next spring.  For a limited time, Market Folly readers can receive a huge 50% discount by clicking here.