Dive Brief:
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Michael Bigger, on behalf of himself, his family, his trading platform, Bachelier, LLC , and his hedge fund, Bigger Capital, LP, which are significant shareholders of apparel retailer American Apparel, sent a letter to the retailer’s board of directors cautioning about conflicts of interest.
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The letter warns that hedge fund Standard General LP’s agreement with founder and former CEO Dov Charney, which turns over Charney’s shares in the company as loan payments, provides incentive to resist a sale that other shareholders may find favorable.
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UPDATE: A spokeswoman for Standard General stated to RetailDive that Bigger’s claims were "baseless."
Dive Insight:
With this latest salvo from Michael Bigger, American Apparel continues its steady stream of troubles and potential troubles. Bigger’s concern is that the retailer’s board of directors have all the incentive to approve or disapprove actions that have “unique advantages to Standard General” at a cost to the rest of its shareholders.
“This Board composition arrangement gives disproportionate power to Standard General and for all practical purposes, effective control over critical decisions for the Company and all its shareholders,” the letter reads in part. “While Standard General has no interest to sell out, not so for the rest of American Apparel's embattled shareholders. Most of us who have remained invested in the stock over the long-term have seen our stakes diminish dramatically in value with the tumultuous events over the past year or so.”
