On the eve of the company’s naming five new directors to its board — the confirmation is expected as early as next week, according to sources — a hedge fund has demanded the resignation of the firm’s two co-chairman, David Danziger and Allan Mayer.
Danziger and Mayer are the incumbent directors who were elected in June at the annual shareholders’ meeting, and are expected to continue with their terms in the reconstituted American Apparel board.
The hedge fund is Bigger Capital Fund, which, along with Bachelier LLC and the Bigger Family, on Thursday made public a letter it sent to American Apparel’s board. That disclosure of more turmoil sent shares of American Apparel down 5.2 percent to $1.09 in trading on the New York Stock Exchange. In early after-market trading, shares fell another 0.9 percent to $1.08.
Mayer declined comment.
The new board to be formed, including Danziger and Mayer, is part of an agreement with Standard General inked last week that provides for Standard General to give the retailer up to $25 million in funding and give founder and former chief executive officer Dov Charney the temporary title of strategic consultant.
Charney is on leave as ceo pending an internal probe regarding certain matters from financial to sexual improprieties. He has filed for arbitration to resolve his employment dispute. John Luttrell, the company’s chief financial officer, holds the interim ceo post.
Bigger Capital said in its letter that the “discredited board has taken a number of reckless actions that go directly against the best interest of shareholders.”
The letter noted the apparent coup by the board in “stealthily and abruptly ousting American Apparel’s long-standing ceo and largest shareholder knowing that their actions will cause a near-imminent default under important contractual obligations of the company and cause it to default on nearly $10 million in loans.”
The loan referenced in the letter pertains to a $10 million loan by Lion Capital.
While not to be taken necessarily as a vote in support of Charney — Michael Bigger, who heads up trading firm Bigger Capital, reportedly made statements in support of Charney at the time of his ouster, but sources said that could have been due to concerns over the default-trigger provision under the Lion Capital loan agreement if Charney ceases to be ceo of the company — the letter noted other actions that the American Apparel board members took that Bigger Capital has deemed to be breaches of their fiduciary duty.
Bigger said Danziger should not be on the three-member committee that will continue to oversee the Charney probe: “We believe it is a clear disservice to shareholders and the integrity of the investigative process to place this decision partially in Mr. Danziger’s hands once again....We firmly believe that any related investigation must be overseen solely by individuals who will have an open-minded, fresh perspective on the matter and will be able to render an impartial decision....”
The letter also took issue with the “unilateral decision to adopt a shareholder-unfriendly rights plan,” also known as a poison pill, that had the effect of stifling shareholder input by “impeding the ability of shareholders to act together in engaging with the company’s management and the discredited board on critical issues regarding the leadership of our business.”
It remains to be seen whether Bigger Capital will get any support from other institutional investors. Sources said that as a practical matter, Bigger Capital has essentially two options: sell the investment stake in American Apparel or file a shareholder lawsuit.
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye
Did you know: @carlychaikin of "Mr. Robot" has been painting for about a decade? The actress, who plays Darlene on the show, is a self-taught artist who lists Salvador Dalí and Chuck Close as some of her idols. Chaikin told WWD that painting is a form of meditation for her — A much-needed one given the intensity of "Mr. Robot." See a piece Chaikin is working on at WWD.com (📷: @jilliansollazzo) #wwdeye