More Sleep Number shareholders join push for new board members

A longtime shareholder of Sleep Number is once again asking for change at the Minneapolis-based company, adding to critical remarks another shareholder made in September.

The shareholder, Blue Clay Capital, has issued critical comments in the past and called for management changes at the maker of smart beds and accessories. On Monday, it issued a new letter to the board of directors, joining criticism fellow shareholder Stadium Capital lodged in September. Blue Clay is asking the Sleep Number board to name Stadium Capital's three nominees to the board.

Blue Clay said in its letter that it's not forming a group with other shareholders, but they are supportive of adding more shareholder voices to the board of directors.

"It is our continued belief that shareholders need a voice on the Sleep Number board, and we strongly support Stadium Capital's attempt to obtain board positions in an attempt to solve the myriad of problems that we have highlighted," Blue Clay wrote in its letter.

St. Louis Park-based Blue Clay Capital are small-cap and mid-cap investors who own approximately 1% of Sleep Number's shares, while Stadium Capital owns approximately 6.9% and is one of Sleep Number's five largest shareholders.

In September, Sleep Number issued a press release in response to Stadium Capital's letter, stating, "The Sleep Number Board and management team are committed to acting in the best interests of the company and all of its shareholders. They maintain regular communication with the company's shareholders and welcome all constructive input."

Blue Clay has complained about the company's management in the past. In 2015, it launched a proxy battle against Sleep Number's management and board of directors asking to appoint two of its own nominees. Blue Clay eventually withdrew its proxy challenge in 2015 after it received assurances that Sleep Number was implementing some of its suggestions, including more aggressive new store openings, improved margins, more shareholder-friendly capital allocation and improved corporate governance. In its new letter, Blue Clay referenced those same changes.

The 2015 challenge proved to be expensive. In its letter, Blue Clay said it cost the company $4.1 million to dispute Blue Clay's ideas. It is urging the Sleep Number board not to repeat that mistake.

"Stop wasting money and time and get to work with three new directors proposed by Stadium Capital," the letter read.