Hedge fund Bigger Capital Fund has sent a second letter to the American Apparel board seeking the resignation of co-chairman David Danziger and and Allan Mayer.
Michael Bigger of Bigger Capital, Bachelier LLC and the Bigger Family, sent an earlier letter on July 17 demanding the resignations of the two co-chairman, alleging that they need to be held accountable for lapses in judgment, which included events that led to the ouster of former chief executive officer Dov Charney.
Since then, American Apparel has reconstituted its board as part of an agreement with another hedge fund, Standard General, which also agreed to give the retailer up to $25 million in funding. That agreement also gave Charney, who founded the firm, the temporary title of strategic consultant. It has also hired Scott Brubaker as interim ceo.
In the letter sent to the American Apparel board today, Bigger said the companies he represents “continue to be supportive of the replacement of five directors with the three designees of Standard General” and the two designees mutually agreed upon by Standard and the company. However, Bigger expressed concern that the new board continues to be led by Danzinger and Mayer. He said that the interests of minority shareholders such as he — collectively, Bigger’s firms own more than 2 million shares — are being disregarded.
He also noted that American Apparel continues to “sustain massive losses and erosion of shareholder value persists.” He also noted the $5.3 million in legal fees spent in connection with the ongoing investigation of alleged misconduct by Charney. A resolution of what role Charney will have with the company, if any, was expected by the end of August. So far there is still no conclusion, Bigger noted in his letter.
The company on Nov. 10 posted a wider third-quarter loss for the three months ended Sept. 30. The net loss was $19.2 million, or 11 cents, from a net loss of $1.5 million, or 1 cent, a year ago. Net sales slipped 5.3 percent to $155.9 million from $164.5 million.
Bigger is again seeking a dialogue with the board, and said should the board “disregard us again, we stand fully prepared to pursue all available courses of action.”
Company executives could not be reached for comment.
Shares of American Apparel were up 1.8 percent to close at 65 cents in trading on the New York Stock Exchange.