Scholastic's Board Chair Skips Meeting to Approve Dumping $12.2 Million of Dead CEO's Shares

Publishing company’s Board Chair will decide who gets millions from private share repurchase.

March 21, 20222

Iole Lucchese, now Scholastic’s (SCHL) Board Chair after CEO Dick Robinson suddenly died and left his controlling stake to Lucchese— Robinson’s one time girlfriend— rather than his family, appears to have approved a multimillion dollar private stock buyback from which she may be the primary beneficiary. Lucchese, also Scholastic’s Chief Strategy Officer, received Robinson’s 53.8% of Scholastic’s Class A shares, giving her voting control of the company.

Lucchese is also tasked with settling Robinson’s estate, which holds approximately $70 million in common shares now at the center of a potentially controversial transaction.

In its latest 10-Q, Scholastic revealed that in January 2022 it entered into a privately negotiated multimillion dollar share repurchase agreement of common shares from Robinson’s estate:

“..the Company purchased 300,000 shares of common stock on January 19, 2022 at a price of $40.65 per share, representing an aggregate purchase price of $12.2 (million).”

Lucchese is on both sides of the deal. Not only does she lead Scholastic's Board— which approved the deal— but as co-Executor of Robnson’s estate, which presumably sold the shares to the company, she’s also tasked with distributing Robinson’s personal possessions. Whether the $12.2 million from the repurchase is considered a personal possession— Robinson’s father founded Scholastic— isn’t clear.

If Lucchese can distribute the $12.2 million to herself, investors should not be surprised by legal action in connection with the repurchase. Though the company can argue the repurchase, which was done at a 4.2% discount at the time, was in the best interest of shareholders, Lucchese’s dual role as Executor of Robinson’s estate—seller of the shares— and Board Chairman—buyer of the shares— at minimum creates the perception of a conflict of interest if not a clearcut conflict.

Investors will also likely question Scholastic's capital allocation. The repurchase, which occurred seven days after the agreement was struck January 12, 2022, was made in a quarter in which Scholastic reported a $19.5 million operating loss. Spending $12.2 million to cash out shares in Robinson’s estate seems a questionable use of cash for a firm posting slim margins even before the pandemic.

The repurchase amount is the equivalent of 38.2% of Scholastic's operating profit for the last nine months.

Once again, the company might argue the use of cash benefitted shareholders, preventing Lucchese from dumping 300k shares on the public market where only approximately 170k shares trade per day (10-day average as of this writing).

Two weeks after DuDil contacted Scholastic to learn whether Lucchese recused herself from the Board’s repurchase vote, the company told us this:

"Ms. Lucchese did not attend (by design) the Special Board meeting held on January 11, 2022 wherein the matter was approved."

Notably, the share repurchase agreement is signed by just two people; Scholastic’s CEO Peter Warwick and his boss, Lucchese.

Lucchese is the third woman at Scholastic known to be romantically involved with Robinson. The prior two were married to Robinson. The second, the mother of Robinson’s two sons, appears to be bankrolling a legal challenge to Robinson’s will and Lucchese’s controlling stake.

Related: NWSA, PSO, JW.A, RELX, NWSA, HMHC, EDUC

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