American Apparel announced on Saturday that the company has adopted a one-year stockholder rights plan. The plan is the direct result of a lawsuit threatened by Charney in order to regain control of the company he founded.
The stockholder rights plan takes effect if any shareholder who already holds 15% or more of the company’s stock tries to accumulate more. Charney owns 27% of American Apparel’s outstanding shares, and he said on Friday that he was looking to acquire another 10%.
American Apparel’s stock has more than doubled since posting a 52-week low of $0.46 on April 8. The stock nearly doubled from a low of $0.51 just last Wednesday. Shares dipped last week when Charney said he would fight to get his job back. Then they rose when the company said it had hired a firm to help it raise cash, and shares really took off at the end of the day Friday as a battle for control loomed.
American Apparel’s $10 million lender, Lion Capital, has so far denied the company’s request for a waiver of the default provision. The company apparently has not yet found a way of coming up with $10 million by Friday, the deadline for repayment.
One possibility is a new loan and another is selling more stock. Finding a lender will be difficult, given the company’s turmoil. Issuing more stock may not do the trick either. American Apparel has issued about 176 million of its 230 million authorized shares.
The remaining 54 million shares are theoretically enough to cover the company’s needs, but the question is how big a discount will American Apparel have to offer in order to find any takers. And if the board increases the number of authorized shares, what will they be worth?
The simplest, cheapest solution is to take Charney back. Of course then the whole board would likely have to go, and so on and on and on.
The stock traded down nearly 10% in Monday’s premarket, at $0.87 in a 52-week range of $0.46 to $2.09.
ALSO READ: Key Stocks With Insider Selling This Week
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
