Two hedge funds are being sued by Charming Shoppes Inc., after they allegedly used shady tactics to nominate 3 members to the board of the company.
The plus-size clothing retailer is accusing Crescendo Partners and Myca Partners of filing “misleading and incomplete documents” with the Securities and Exchange Commission to win shareholder support for their nominees.
The two hedge funds filed the documents on February 28, citing a variety of complaints, including the company’s “disastrous stock performance” and a “lack of focus on core assets.” Charming Shoppes shares are trading at around $5, close to their 12-month low. Last year, their stock reached over $13 a share.
The hedge funds are hoping to nominate Arnaud Ajdler, Managing Director of Crescendo, Michael Appel, Managing Director of Quest Turnaround Advisors, and Robert Frankfurt, President of Myca Partners, to the board.
“We believe the current Board of Directors and senior management are responsible and must be held accountable for a flawed business strategy and poor execution,” the Full Value Committee said in a statement.
Charming Shoppes says that the hedge funds have “a track record of using proxy fights to disrupt corporations and to profit by forcing them to sell assets, buy back stock or buy off defendants and their cronies."
Crescendo and Myca own about a 7.9% stake in the company, or just over 9 million shares.
Charming Shoppes Inc. supplies clothing to various outlets such as Fashion Bug and Lane Bryant. They operate 2,410 stores in 48 states. In the midst of poor sales and lagging stock prices, the company has announced that they will close 150 stores around the country.
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: [email protected]]
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