American Apparel Thesis Blossoming
- Posted by Michael Bigger
- on May 14th, 2012
On May 6 2011, we wrote our initial post about American Apparel ($APP). It is hard to believe that we have worked on this situation for more than one year already. Investing in distressed situations requires a fair amount of patience. The process by which the original thesis is tested against actual results evolves over a few years time frame; the investment growing in size as the results back up the original thesis.
We have been following every single move of the largest investor that invested capital in the company back in April of 2011. The big elephant in this deal was not Serruya but GCIC through its Dynamic Power Hedge Fund. GCIC has owned more than the 13-G filing requirement since the deal was executed.
GCIC owned 7,381,607 common shares (7.49% undiluted) as of June 30, 2011. In its latest 13G filing GCIC disclosed that it owned 20,005,216 common shares (18.38% undiluted) as of March 31, 2012.
In April 2011, Michael Serruya, representing the investor group, had this to say about the original deal:
“We believe in the American Apparel brand and we believe in Dov Charney,” Mr. Serruya said. “We are convinced that with adequate resources, Dov and his experienced management team will lead American Apparel to new heights.”
The actions of GCIC indicate that it continues to believe in the original thesis, and that the company might very well elevate to new heights. The first quarter of 2012 results indicate that this is becoming a higher probability situation.
P.S. Don’t go out and buy the stock. This is a highly distressed situation and it is not suitable for the majority of investors. The purpose of the post is to write down how I think about this and share it with you.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Michael Bigger is an investor and a trader who has been involved with trading technologies for more than twenty years. In 1992, Michael joined Citibank as head trader of U.S. single-stock derivatives, where he managed a $5 billion portfolio of equity derivatives. In 1998, he joined D.E. Shaw & Co., L.P. to trade the U.S. equity derivatives portfolio. (More)