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FiveT Takes 11.5% Stake in American Apparel

Switzerland-based investor has history as activist shareholder.

Beleaguered vertical retailer American Apparel Inc. has a new investor, and it’s one with a history of shareholder activism.

This story first appeared in the April 7, 2014 issue of WWD.  Subscribe Today.

FiveT Capital Holding AG, a Zurich-based investment fund headed by Johannes Minho Roth, has acquired 20 million shares of Los Angeles-based American Apparel, translating to an 11.5 percent stake in the company.

FiveT acquired 26 million shares in the company on March 26 as American Apparel sold 61 million shares of new stock to the public for a price of 50 cents each. The investment firm subsequently sold 3.5 million shares at 51.1 cents each and an additional block of 2.5 million shares for 50 cents each on March 31.

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The holdings were disclosed in a regulatory filing with the Securities and Exchange Commission Friday. On Thursday, Lion Capital updated the SEC on its holdings subsequent to the issuance of new stock. Its warrants for American Apparel stock would translate into 24.5 million shares, or a stake of 12.4 percent, if they were exercised and those shares added to the 173.4 million outstanding since the recent public offering.

The FiveT filing was in a Form SC 13D, generally for investors taking an active rather than passive stake in a firm. In 2011, Roth, a citizen of Germany, pressed for changes at TheStreet.com after FiveT acquired a 6.3 stake in the company. Roth’s SEC filing in 2011 included a letter that had been sent to TheStreet.com’s board. No such communication was included in the filing for its American Apparel investment.

Dov Charney, founder and chief executive officer of American Apparel, held 47.2 million shares, or 42.8 percent of those outstanding, as of Dec. 31 but hasn’t filed updated paperwork to reflect any additional shares acquired or dilutive effect since the recent public offering. Based on FiveT’s filing, those shares would represent a 27.2 percent stake in the firm.

Like Charney, Lion has protection against dilution in the event of the issuance of new shares, and Lion also has the right to two seats on the company’s board. Lion’s Lyndon Lea and Neil Richardson resigned as directors in April 2011, and the firm hasn’t exercised its right to a presence on the board since.

American Apparel shares Friday gained 1.5 percent to close at 51 cents. The company belatedly filed its annual report with the SEC on Tuesday after missing the original March 17 deadline. It still faces possible delisting by the NYSE MKT exchange.