272 Capital, LP Issues Letter to Board of Directors of TTSH

272 Capital, LP, a shareholder of Tile Shop Holdings, Inc. (OTCMKTS: TTSH), publicly released a letter it delivered to the Board of Directors of TTSH on October 27, 2020. The full text of the letter is included below.

To Members of the Board of Directors,

272 Capital, LP currently owns 660,306 shares of Tile Shop Holdings, Inc. (“TTSH” or the “Company”) and we are writing because we believe TTSH’s common stock shares (the “Shares”) are significantly undervalued. While we expect the Shares to appreciate as the Company reports improving financial performance during the remainder of 2020 and all of 2021, we believe TTSH’s Board of Directors (the “Board”) can also take action to significantly increase shareholder value in the near-term. Specifically, we urge the Board to immediately relist the Shares of the Company on a major stock exchange.

We strongly believe that up-listing to a major exchange will result in a significantly higher share price for the shareholders and a lower cost of capital for the Company. This will be the case for a multitude of reasons including:

1. The environment for companies that are in the business of providing home building products, remodeling products and home furnishings has improved significantly over the last few months. Not only from a business perspective but from an investor interest perspective, which has resulted in multiple expansion and higher share prices across the board as the COVID driven “nesting” trend has taken hold.
   
   
   
2. Multiples of peer companies have expanded significantly. For example, two publicly traded peers, Floor & Decor Holdings, Inc. (NYSE: FND), and Lumber Liquidators Holdings, Inc. (NYSE: LL) have had their enterprise value, excluding operating leases to EBITDA multiples, expand by over 100% from 2018 levels as demonstrated in the table below. TTSH’s multiple on the other hand has slightly declined over the same time period. We believe this is simply a result of being listed on the OTC versus a major exchange.
   
   
   

   EV/EBITDA
   Company	Ticker	FY18	FY19	FY20E	Multiple Expan
   Floor & Decor Holdings	FND	14.0x	21.5x	34.4x	146%
   Lumber Liquidators	LL	8.4x	8.4x	15.9x	88%
   Tile Shop Holdings	TTSH	6.6x	10.1x	6.1x	-8%
   Source: Bloomberg & 272 Capital Ests

   
   
   
3. Listing on a major exchange is necessary for passive investment funds to buy shares. For example, at its current market capitalization, TTSH would qualify for inclusion in the Russell 2000 index, which should create demand for, at least, approximately 7-10% of the Shares and support a higher stock price. Further, given the fact that passive funds are a larger percentage of the market than active funds the overall amount is likely much larger.
   

With the recent addition of three new independent Board members, it is crucial that the Board evaluate an up-listing, as we believe the benefit to shareholders outweighs the relatively small amount of cash savings that are derived from not being listed on a major exchange.

I look forward to discussing this further.

Sincerely,

Wes Cummins
CEO, 272 Capital LP

wes@272.capital
214-556-2465

Disclaimer

This material does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein in any state to any person. In addition, the discussions and opinions in this press release are for general information only, and are not intended to provide investment advice. All statements contained in this press release that are not clearly historical in nature or that necessarily depend on future events are “forward-looking statements,” which are not guarantees of future performance or results, and the words “anticipate,” “believe,” “expect,” “potential,” “could,” “opportunity,” “estimate,” and similar expressions are generally intended to identify forward-looking statements. The projected results and statements contained in this press release that are not historical facts are based on current expectations, speak only as of the date of this press release and involve risks that may cause the actual results to be materially different. Certain information included in this material is based on data obtained from sources considered to be reliable. No representation is made with respect to the accuracy or completeness of such data, and any analyses provided to assist the recipient of this presentation in evaluating the matters described herein may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results. Accordingly, any analyses should also not be viewed as factual and also should not be relied upon as an accurate prediction of future results. All figures are unaudited estimates and subject to revision without notice. 272 Capital, LP disclaims any obligation to update the information herein and reserves the right to change any of its opinions expressed herein at any time as it deems appropriate. Past performance is not indicative of future results.

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