Clinton Group Inc. received the news it had been waiting for yesterday afternoon when teen apparel retailer Wet Seal Inc. called to concede a proxy contest for board seats. The victory didn't last long.
At about 3 p.m., Wet Seal's banker told Clinton "it appears you have won," according to a U.S. Securities and Exchange filing today. The board members Clinton wanted to replace were ready to resign and assist with the transition, said the banker, who wasn't named in the document. Clinton agreed to settle and began discussing a press release.
That all changed about seven-and-a-half hours later when the banker called back to say the proposal was off the table, Clinton said in the filing. That means that Clinton, which owns 6.9 percent of Wet Seal, will continue pushing for its consent solicitation, a proxy proposal that doesn't require a meeting, to be approved by shareholder vote.
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"Consent solicitations are always contentious, but this one is strange," said Damien Park, a managing partner at Hedge Fund Solutions LLC in Philadelphia, which researches and consults on activist investing. Wet Seal may have learned in the interim that a large shareholder changed its vote, he said.
Wet Seal declined 0.6 percent to $3.16 at the close in New York. The Foothill Ranch, California-based company's stock has declined 3.1 percent this year.
'Reversing Themselves'
Retracting the resignations "is one more example of this board taking an important decision and then reversing themselves in short order," Greg Taxin, a director at New York-based Clinton Group, said in an interview. "It further demonstrates their inability to make decisive moves as fiduciaries for the shareholders."
Many shareholders still haven't voted, Taxin said.
"We keep getting calls from people who are looking for ballots," he said.
Dave Millar, a spokesman for Wet Seal, didn't respond to calls or an e-mail seeking comment.
Clinton has criticized the company since June, saying shifting strategies, personnel changes and operational mismanagement have hurt results. The retailer in July fired Chief Executive Officer Susan McGalla after a year and a half in the job, prompting Clinton to call for a sale to a buyer that can revive the chain.
Wet Seal's board, led by Chairman Harold Kahn, responded in August by adopting a takeover defense, or poison pill, and announcing a turnaround plan. It also hired Guggenheim Securities LLC and Peter J. Solomon Co. to perform a strategic review of the company to maximize shareholder value.
Clinton then said it would nominate five members for the board in an effort to improve the retailer's declining revenue and share price.
Same-store sales, a key measure of a retailer's growth because only established stores are counted, fell 13 percent in September, the company said today in a statement. The results show progress after revenue by the same measure sank 18 percent in August, the company said.
Bloomberg News
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