American Apparel’s Canadian Saving Grace
The ever so trendy clothing brand and hipster mecca, American Apparel, has had a lot of buzz over the past year as to whether or not they will be able to stay afloat after a really difficult economy combined with all of the Public Relations drama regarding women employees filing sexual harassment suits. The retail giant was in threat of going bankrupt for about the past year until just recently when CEO Dov Charney accepted a saving grace from an unlikely place. American Apparel had previously repeatedly warned investors that they were concerned they would not be able to continue after a loss of $86 million in 2010 and predictions of more operating losses in 2011 when a group of Canadian investors obviously believed that American Apparel was worth saving and can thrive once again, so they invested $45 million into the company.
In technical terms the Canadian investors will invest up to $15 million in equity with shares in the range of $0.90 each, a 27% discount to American Apparel’s closing price of $1.24. The investors then would have to obtained warrants to purchase an additional $30 million worth of shares during the next 6 months at $0.90 per share.
Charney is committed to the fact that he believes they would have managed to survive on their own, but that the investment was a great investment and will catapult the company back to the global power it was.