American Apparel Situation is Further Complicated

The Luxonomist. 08/01/2015
American Apparel Propierty

American Apparel, the famous U.S. clothing stores chain, is seeing as its future is complicating by the minutes. The last complication arose was the request of one of its shareholders, the investment firm Lion Capital, which has urged the company to take a final decision on its future.

Lion Capital has asked the retailer to form a special committee to assess iys future options, including the possibility of accepting a takeover offer. This request is especially significant because so far Lion was one of the shareholders which supported the Board in its fight against the founder and major shareholder of the company, Dov Charney.

Charney was forced to leave his post of president a few months ago (accused of misconduct, including sexual-harassment charges and misuse of corporate funds) and has been trying to regain influence over the company, including increasing its stake to over 40%. It is also believed he is behind the bid received a few days ago by American Apparel to get up to $ 1.4 per share, rejected by the company as too low. However, no new offers have appeared and some shareholders, including Lion Capital, may be losing confidence in the board.

To understand this position, it is necessary to remember that in the past two weeks, American Apparel stock has risen more than 80% and still trades below $1.1 per share, which means that the rejected offer would mean another 30% increase. This adds up to $300 million lost by the company since 2010, a slab that might be too heavy for investors.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

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