Leveraging its 5.2% stake in the company, activist investor Marathon Partners has opened a proxy fight with e.l.f. Beauty, Inc. (NYSE:ELF), attempting to seat three new directors on its board. The equity management firm issued a press release today laying out its case to stockholders, proclaiming "e.l.f.'s lack of discipline in managing overhead expenses has deprived shareholders of profit growth, and therefore, investment returns."

Marathon asserts e.l.f.'s total return between its Sept. 21, 2016 IPO and May 26, 2020 is a loss of 1.9%. It compares the company's performance to that of the S&P 500, which provided a 48.9% return over the same period, and the average return of "e.l.f. peers" Shiseido, L'Oreal, Estee Lauder, Revlon, and Coty, which it claims generated a 36.2% total return.

Women touching various cosmetics on a shelf in a store.

Image source: Getty Images.

One of the activist investor's partners and a candidate for the board election, Mario Cibelli, says of e.l.f.: "We continue to be frustrated by the directors' willingness to tolerate obvious underperformance, all the while richly rewarding the senior executive team despite the lack of profit growth and shareholder returns." He went on to say that the new directors, if elected, will work to institute "cost discipline, efficiency of operations, improved executive incentive programs" going forward.

Marathon might have some investor sentiment on its side. Back on May 4 to May 5, when an SEC filing made the company's increased stake in e.l.f. Beauty public, e.l.f.'s share price jumped from $12.47 late on May 4 to $13.07 at market open the following day, a +4.8% rise.

The election will occur three months from now, almost to the day, on Aug. 27 at e.l.f.'s annual stockholders' meeting. Marathon's three candidates are Dhiren Fonseca, Mario Cibelli, and Beth Birnbaum.