Shareholder Demands Vitesse Sale

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The largest shareholder of troubled Vitesse Semiconductor Corp. is demanding that the Camarillo-based computer network chipmaker be sold.


El Segundo-based hedge fund Chapman Capital LLC, which has a 7.3 percent stake in Vitesse, said in a Friday regulatory filing that Vitesse should be sold for at least $4.50 a share. The company now trades at $1.66 on the pink sheets.


“Chapman Capital demands that Vitesse, following financial restatement and rescission of all improperly granted stock options, conclude a full scale auction of the company,” said Robert Chapman, a former Goldman Sachs trader who manages the $300 million hedge fund.


Vitesse officials could not be reached for comment Friday afternoon.


Vitesse, which was delisted from Nasdaq last month, is one of dozens of companies under investigation for allegedly backdating option grants to senior executives. The company in May fired its chief executive and two other top managers over the controversy. In a scathing letter to the board of directors, Chapman called on directors to rescind all unexercised, backdated options granted to the former management, and take action to obtain restitution of gains from questionable exercised options.


“Chapman Capital believes that after treating back-dated stock options tied to the success of Vitesse’s computer chips like past-expiration bags of potato chips, the board’s stewardship shall be proven grossly negligent, if not fraudulent,” he said.


Chapman has a history for being an activist shareholder, having agitated for the sale or restructuring of more than 17 companies over the past decade.

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