By Philip Segal

August 22, 2025 (New York) (updated August 25, 2025)

·       Le Chateau and DAVIDsTEA founder Herschel Segal disinherits two eldest children, leaving entire fortune worth tens of millions of dollars to second family. Eldest children left only restricted shares valued as “worthless.”

·       Two Jewish grandchildren stand to inherit millions from Segal’s second wife – one ethnic Chinese grandchild left nothing. Eldest child, Philip Segal, “cannot discount” racism and religious discrimination as a motive for this decision.·      

·       Large inter vivos transfers by Segal began around the time his wife discovered one of his many mistresses had been given an apartment in Montreal by Segal. His will was changed two weeks before his death this year at 94.

 ·       Eldest children left restricted shares in holding company controlling DAVIDsTEA, pronounced “worthless” by the accountant of Segal’s widow and DAVIDsTEA board chair, Jane Silverstone Segal. Silverstone Segal refused to buy elder children’s restricted shares even at deep discount, arguing “It could take ten years” to get to $5 a share. When advised of this blog’s existence, the offer was $250,000 for shares that could be worth $4.3 million if the company is sold for $5 per share.

·       Why should DAVIDsTEA CEO Sarah Segal remain in her job after overseeing catastrophic destruction of shareholder value? Do the independent directors agree with the statement of board chair Jane Silverstone Segal (her mother), “Thank God Sarah is running that place because nobody else could do it”?

·       More misery likely ahead for minority shareholders, described by Herschel Segal during his life as a “pain in the ass.”

Herschel Segal, the wealthy founder of Le Chateau and DAVIDsTEA, two well-known Canadian retailers, left his entire fortune to his second family while disinheriting his two eldest children, according to Martin Goldsmith, accountant at MNP LLP in Montreal and the trustee of a trust set up for the elder children. They are Philip Segal, an investigative lawyer in New York, former adjunct professor of fact investigation at Cardozo Law School, former Finance Editor at the Asian Wall Street Journal and business writer with the International Herald Tribune; and Robin Segal, an entrepreneur based in Ottawa.

While the eldest children did receive preferred shares in Rainy Day Holdings, Segal’s company that holds a nearly 45% interest in DAVIDsTEA, these shares are only worth anything if DAVIDsTEA is sold for more than $112 million, nearly four times its current valuation and a price it has not recorded for many years. If the shares should rise to that level but are not sold by Rainy Day, the elder children receive nothing. The shares carry no dividend rights, no voting rights, and are not transferable without the approval of both trustees, one of whose firm is the registered address for Rainy Day Holdings.

When I approached Jane Silverstone Segal and offered to sell her some of these shares at a discount, arguing that they would be worth millions if the stock went to $5, she said: “That could take ten years.”

Martin Goldsmith said, “Jane and I have looked at this every which way, and the shares have no value.”

DAVIDsTEA emerged from restructuring (bankruptcy in the U.S.) with annual sales of $80 million in 2023, but this figure subsequently plunged to around $60 million, where it remains, without any clearly articulated strategy for faster growth. In many companies, this would spell the end of the CEO’s tenure, but not in this case. “Thank God Sarah is running that place because nobody else could do it,” said her mother and board chair on July 10.

This faith in her daughter’s ability to steer the company into profitable times is part of a human resources policy at Segal family companies not based on merit but on blood relationship. The idea that only her daughter is capable of a running small-cap company – not someone who may have worked at Starbucks, Tim Hortons or any number of other companies that consistently rewarded shareholders, is laughable but sadly, part of a long pattern. This is entirely the fault of Herschel Segal, who enabled this behavior.

The Need to Speak Now

Why have I never spoken out against the abysmal corporate governance and management of DAVIDsTEA before now? Three reasons.

Firstly, filial allegiance to my father. I never saw and still see no evidence of illegal conduct. It was his company (subject to board supervision) to manage as he saw fit. The market in general greatly disapproved of the management, as any glance at the company’s stock price performance chart will demonstrate. Since its IPO in 2015, it has recorded just two quarters of profitability (one of these driven by forgiven debts after its insolvency and restructuring in Canada, known as bankruptcy in the U.S.).

Secondly, until the contents of the trust were revealed to me on July 4 of this year, I had no knowledge that I had any beneficial ownership in DAVIDsTEA. However, my father’s decision to disinherit me and my sister (as well as his eldest grandchild) greatly disappointed me. Now, my only inheritance of any value will come if DAVIDsTEA get new management that is not happy to take large salaries and board fees in exchange for plunging sales and moribund stock prices. Since management has not presented any cogent strategy for growth, and in my opinion would have been fired years ago in a properly managed enterprise, it is my duty to my own family to try to urge others to effect change at the company.

Thirdly, as much as it stings to be omitted completely from any inheritance from a person who was at one time worth at least $70 million, I cannot discount a racial and/or religious motive in excluding my son, a 23-year-old ethnic Chinese man whom my wife and I adopted when he was nine weeks old while we lived in Hong Kong. A graduate of Indiana University, he is a software engineer at a U.S. insurance company. He studied hard, he works hard, he is pleasant and kind, and we cannot fathom why his grandfather would choose to leave him absolutely nothing. My father never expressed racist thoughts to me during his life, but neither did he ever indicate that my family and I would be cut out completely from his estate.[1]

The disparate impact of his decision is stark. Two Jewish grandchildren stand to inherit millions of dollars from their grandmother and mother, while an Asian grandchild gets nothing. DAVIDsTEA makes a lot of its commitment to diversity, equity and inclusion. My hope is that the people now running the company show a greater concern with the disparate impact on people of color than did their founder.

A Nearly 20-Year Family Tradition: High Salaries and Dismal Performance

For more than 20 years, Herschel Segal’s company Le Chateau was privately held. It was profitable after an initial public offering in 1983, but not long after Jane Silverstone became CEO the wheels began to fall off.

She became CEO of Le Chateau in 2006, and the next year Herschel Segal raised $18.1 million in secondary offering, diluting the holdings of the public. He had given Jane 100,000 subordinate voting shares worth some $6.3 million. Between November 2006 and April 2007, the dividend rose from 25 cents a share to 50 cents a share. The newly gifted shares thereafter were eligible for dividends worth $200,000 per year. In 2008, the company said its dividend was the 58th consecutive one, going back to 1993. But the dividends would not last past 2014.

Le Chateau earned a profit until the year ended January 2011. Losses began the following year and ballooned to a loss of $38.6 million for the year ended January 2015. The shares had traded as high as $3.01 in 2014 but plunged as low as 66 cents in January 2015. In 2016, the loss narrowed slightly, but sales fell more than 4% and comparable store sales were flat. In a foreshadowing of the decline of DAVIDsTEA, management decided to list on the Toronto Venture Exchange and to delist from the Toronto Stock Exchange.

In January 2017, the stock had traded as low as 18 cents a share.

Given such a precipitous decline, many well run companies would have shaken up their management in order to bring about immediate change. Le Chateau stuck with the same CEO who had been in place for 11 years. It was not until 2019 that Jane Silverstone cut her salary from $1 million a year to $800,000. With the company teetering on the brink of bankruptcy, and after Herschel Segal had loaned it some $26 million to keep it afloat, Jane advanced her own loan of $1 million – much too little and far too late.

By 2020, the company was bankrupt under cover of COVID, but Herschel Segal admitted to me that the company was “dead for years” before that. It was never given the new management it needed.

The Family Moved Over to DAVIDsTEA

Herschel Segal had started DAVIDsTEA in 2008 with David Segal, my second cousin who had brought him the idea of retail tea stores. Le Chateau was still profitable, Jane had become CEO two years before, but critically, this was also around the time Jane discovered that one of the many mistresses my father kept throughout his two marriages was not only living openly with him in Montreal but socializing with their friends. Herschel Segal had purchased an apartment for her, which Jane discovered. At this point, large inter-vivos transfers of property from Herschel to Jane began.

DAVIDsTEA began with great promise, and in 2012 took in $14 million from Boston’s Highland Consumer Fund for a 20% stake in the company. An initial public offering in 2015 saw DAVIDsTEA raise $64.9 million on NASDAQ at US$19 a share. Existing shareholders sold an extra $46.6 million. The stock shot up to US$27. But weeks later, the company stunned investors with a first-quarter loss of $93.2 million and the shares plunged 25% in a single day. The company blamed the high costs of the IPO.

It got worse from then on. Herschel Segal had been dissatisfied with the CEO the Highland Capital had hired, and almost immediately became dissatisfied with his new chief executive, Sylvain Toutant. As would be his pattern, new CEOs not named Segal could begin to disappoint him within weeks of being hired, as he frequently complained to me over the years. After Toutant left in late 2016, Segal hired Joel Silver in 2017, a former executive at Indigo Books and Music. As before, he began to complain within weeks about Silver, who lasted until 2018 when Segal, after resigning in March of that year, regained control of the company through a proxy battle. Proxy consultants Glass Lewis had objected to a board slate Segal controlled, but he prevailed over shrill protest from outraged institutional investors. He became Interim CEO as well as Chair of the Board.

In the year ended February 2018, just before he resigned, the company lost $1.11 a share. But after his first year in control of the company once more, the loss increased to $1.29 a share. For the year ended 2020 and with COVID closures still more than a month away, the company did slightly better but still lost $1.20 a share. Of greater concern to some, sales had continued to fall and were 12% lower than they had been two years before. Investors stampeded for the exits, as the company’s stock price chart in its February 2020 annual report demonstrated. Not only had it badly underperformed the S&P500 Index, but the S&P Consumer Discretionary Index as well:

After being forced to close many stores with the COVID lockdowns that began in early 2020, the company was insolvent and sought protection from its creditors (known as Chapter 11 or for foreign companies, Chapter 15 bankruptcy in the U.S.). Never satisfied with three external CEO’s and having failed to improve the company himself, Segal decided on a new Chief Executive Officer to take over the still insolvent company – his daughter Sarah. She had been promoted up the chain at DAVIDsTEA since beginning to work at the company on and off in 2010. She became a director in 2012 at the age of 28. By 2018 she was Chief Brand Officer, making $302,000 a year. Her most recent experience before becoming CEO was running a company financed by her father, Oink Oink Candy Inc. (doing business as Squish Candy). Herschel Segal told relatives of the millions of dollars this company had lost. In the very first DAVIDsTEA annual report in which Sarah reported as CEO, the company disclosed that DAVIDsTEA had entered into an agreement to lend Squish $4 million. This was amended to $2 million, and the money was paid back in April 2020.

Sarah’s compensation rose steadily as the company’s performance declined. In 2019 she got a raise of 6% to $322,000. The following year she was promoted to CEO on December 16, 2020. Her total compensation ballooned to $419,224. The next year, total compensation for Sarah was $1.35 million, including a salary of $501,000 and stock awards of $823,949.

Herschel Segal complained to me several times that he wanted DAVIDsTEA to buy Squish Candy, but that the board would not permit it. I told him repeatedly that people who bought a tea company at US$19 a share did not bargain on owning a money-losing candy company run by the controlling shareholder’s daughter. He would then say being a public company was a “pain in the ass.” The idea that he was harming small shareholders for personal gain did not disturb him in the least.

DAVIDsTEA emerged from insolvency in 2021 much leaner, having shed nearly all of its physical stores. By this time, Le Chateau was dead and buried, Herschel Segal’s health was failing at the age of 90, and Jane Silverstone needed a new company to run. So, she became the Chair of DAVIDsTEA. She was now acting in the role of board enabler formerly occupied by her husband, while her daughter took on the role of CEO supervised by an eternally friendly, family-controlled board – a board whose only major function is to ensure that the company is led by the best person possible.

After restructuring and getting excused by the court from masses of debts in September 2021, with far fewer stores to run, the company reported total sales for the year ended January 2022 of $104 million, with another dismal share price comparison to the overall index and its own consumer discretionary sector.

Sales for the new leaner company continued to plunge. Sales the following year fell 20%, and for the year ended February 2024 they were down another 26.9%, to just $$60.6 million. For the year ended in February 2025, sales ticked up to $61.8 million. There is no credible plan for returning sales to their level of just a few years ago – at least not one that has persuaded the market or me.

The Way Forward

Jane Silverstone Segal has sole voting control of the major block of shares she inherited from Herschel Segal as well as the restricted shares of the elder children. That is not a majority and others could take action. My prediction would be that if the current CEO were dismissed in favor of an executive with a good track record (for example, someone who successfully managed businesses at Tim Horton, Starbucks or some other well managed enterprise), shares would shoot upward almost immediately.

Were sales to be returned to the $104 million recorded in 2022, the company might reasonably be sold for twice that figure, which would be some $7 per share.

The chances of this happening are slim given the Chair’s view that her daughter is the only person capable of running DAVIDsTEA.

Why continue this epic-scale capital destruction? The values were passed on from the founder. “It was never about having the most profitable business,” a former DAVIDsTEA employee told me. “It was about keeping control.”

Last summer, I thought the company was again close to insolvency, given how low the cash reserves were and the rate at which operations were eating into those reserves. The company has survived, for now. But with the board chair ruling out any chance of substantial shares price growth in the near future, as well as “no” on the idea of any change in management, what hope is there for the shareholders who are not lucky enough to draw huge management or board salaries, who are not granted generous stock options as an “incentive” not to go work somewhere else?

My hope, now that I am a beneficial shareholder unable to sell, is that someone can come in and rescue the business before the Segal family files its third corporate insolvency since 2020.

Final Thoughts

Until July 4 of this year, I never would have considered writing any of the above. I loved my father and meant every word of the eulogy I gave at his funeral. This was nicely summed up in the Canadian Jewish News in June. https://thecjn.ca/news/obituaries/obituary-herschel-segal-94-was-a-visionary-who-founded-le-chateau-and-helped-budding-entrepreneurs/

I spoke at the funeral about all the good deeds I had seen my father do, and his commitment to working as long as he could. I left it for others to discuss his businesses because of what I view as the mixed record he left behind – fantastic early success, badly squandered.

He was a major source of advice and support throughout my career. He encouraged me to quit my job at The Asian Wall Street Journal and to enroll at Yale Law School on a fellowship I had to refund when I decided to get a full law degree. “I’ll back you,” he said. While I gave up three years’ salary and paid for law school myself, he was generous in helping us to buy our first home. That generosity was much appreciated, especially as we paid heavily to have our son educated in quality schools in New York and then in university. We used our savings not to travel between multiple luxury residences but to build our successful businesses and to educate our son. Unlike in some portions of the Segal family, everyone worked, and worked hard. If we did not provide what our customers and clients wanted, we did not get paid.

Now, as a complete surprise and with no written note from him to explain his decision, I find myself a minority shareholder in a poorly run company, with no ability to sell or to vote my displeasure at an annual meeting.

Growing up, my father always told me that if I wanted to work with him, I would need to work somewhere else first in order to prove myself so that I would not always be known as the guy who got the job because of who is father was. I never wanted to be in his business, preferring journalism and now the field of legal investigations. But this rule for my sister and me was eliminated for family number two.

Herschel Segal treated his small shareholders with contempt, and it turns out that my sister and I received similar consideration. But while minority shareholders can sell, we are not even given that right. It is as if we were strangers to him.

I intend to maintain this blog as long as I am a shareholder at DAVIDsTEA. I have spoken to many former employees already and thank them for their generosity in taking time to speak with me. I plan to relate what others have said in future entries on this website, as well as to offer news and analysis following all corporate announcements.

[1] A lawyer for DAVIDsTea, shown a draft of this article, argued that my father treated his grandchildren fairly because all five of his children were left identical amounts of valueless shares. Only a securities lawyer could view this bequest as equitable or fair. What estate lawyer would advise the following: “Mr. Segal, give everything of value to the mother of your youngest children. Give nothing of value to any child. Your wife, who has not spoken to your son and eldest child in 20 years, may be counted on to distribute your wealth fairly among your five children.” The idea is laughable on its face, but to be fair, the securities lawyer was arguing for his client with the facts he had. This was the best he could do.