Francesca’s plans reverse stock split

May 07, 2019

Francesca’s is in dire straits, as detailed last week in the report on its fourth quarter — a pivotal period for any apparel retailer — and its full-year results.

Its low share price is a reflection of those woes, and its delisting has exacerbated that particular problem, as institutional investors whose rules prevent owning shares of companies in that situation also abandoned their stock in the company. While reducing the number of shares is an artificial method of boosting the per-share price and inferior to boosting it through good business performance and strong sales, it’s not at all a “nefarious” or illegitimate move, according to Alon Kapen, a partner at law firm Farrell Fritz who heads the emerging companies and venture capital practice group.

The company’s new take on its risk factors is also something that the SEC “pays close attention to,” Kapen also told Retail Dive in an interview. But investors needn’t necessarily be alarmed, he also said. “It can indicate a management team that’s thinking critically,” he said. “It really depends on the substance of the risk being disclosed.”

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  • Featured Attorneys: Alon Y. Kapen
  • Publications: Retail Dive