Sequential Brands Group Inc.’s management is pointing at short sellers, whose goals are often to capitalize on a stock’s decline, after the firm’s share price experienced significant sell-offs in recent weeks.
For much of the past year, Sequential has been on an acquisition winning streak — snapping up the billion-dollar Jessica Simpson brand, Joe’s Jeans and Martha Stewart Living Omnimedia. However, recent stock volatility — the firm’s share price hit a 52-week high of $18.59 in July but sank nearly 60 percent, to a low of $8.09 on Monday — has raised concerns about the growing brand-management firm.
“Tengram Capital Partners, as the largest shareholder of the company, has been closely monitoring the significant decline in the company’s stock price and associated increase in trading volume,” Sequential Chairman William Sweedler said in a statement to shareholders on Monday afternoon. “We believe this decline in stock price and related increase in volume is being driven primarily by short sellers. The Securities & Exchange Commission only permits this activity if the short sellers have access to shares that may be borrowed to cover their positions. What you may not know is that you, as a stockholder of the company, may be facilitating the ability of these short sellers to create these positions by permitting your shares to be borrowed.”
Tengram — whose portfolio includes names like Tommie Copper, Active Ride Shop and Italian luxury apparel brands Zanella and Luciano Barbera — has instructed its broker that it will not permit borrowing of any of its shares by short sellers, Sweedler added.
“[Short sellers] are only interested in reducing the value of the company’s stock price for their short-term gain,” Sweedler cautioned shareholders. “We urge each of you to contact your broker today and inform them that your shares may not be made available to be borrowed by short sellers.”
In November, at least one analyst had speculated that the pressures facing Iconix Brand Group — which saw accelerated management turnover and grappled with an SEC investigation — could begin to spill over to other brand-management firms, namely Sequential.
“We believe the recent turmoil at Iconix Brand Group, coupled with cautionary comments by department stores, has weighed on Sequential — undeservedly so,” Canaccord Genuity Inc. analyst Camilo Lyon wrote last month. “While we fully understand why the negativity around Iconix has clouded the view on the sector, we believe there are distinct differences between Sequential and Iconix that necessitate noting.”
When Sequential last reported, in Q3, its revenue had soared 130 percent year-over-year, to $23 million, while profit climbed 3.1 percent, to $2.7 million.