Lifestyle company Digital Brands Group — which owns brands such as Sundry, Stateside and more — announced its board of directors decided to initiate a formal review to explore strategic alternatives for the company.
The review process “will evaluate a broad range of options to maximize shareholder value,” according to a company press release Monday. Digital Brands Group has not set a deadline for the process and would not provide assurance that it would result in a specific outcome.
"Given the continued dislocation between Digital Brand Group's public market value and the intrinsic value of Digital Brands Group's underlying assets, we believe an evaluation of strategic alternatives is a prudent approach to ensure we are maximizing value for our shareholders," Hil Davis, CEO of Digital Brands Group, said in a statement.
On a call held by Davis via X — formerly known as Twitter — on Monday, the CEO said the company believes it is severely undervalued. The company’s stock was trading at around $3.87 at the time of publication.
“We have to look at additional opportunities, offers, strategies that will drive shareholder value because it doesn't seem that either EBITDA or cash flow or revenue growth matters to the markets at this point, which is very unfortunate,” Davis said on the call.
The company in August reported its second-quarter net revenue rose 69.6% year over year to $4.5 million and a net income of $5 million compared to a loss of $9.5 million last year. It reported its income from operations was $7.6 million compared to a loss of $10.6 million the year before.
Digital Brands Group has reported net losses of $1.1 million and $17.4 million for first six months of 2023 and 2022, respectively, and has prepared financial statements on a going concern basis, per its quarterly filing from Aug. 21. The company had a working capital deficit of about $16 million as of June 30 and “expects to continue to generate operating losses for the foreseeable future.”
The announcement comes about eight months after Davis indicated on a company call that Digital Brands Group could go private after being approached by a private equity firm. At the time, the executive noted that “if the price were to come in lower than we expected and our valuation doesn’t change, we will hire bankers to go private.” Additionally, the CEO said at the time that the public market didn’t value the company’s model.
