PLCE - Children's Place Can Recover And Could Be A Speculative Buy
2024-03-11 11:47:16 ET
Summary
- PLCE is an American apparel retailer focused on children's apparel.
- Bad decisions drove the company to its knees, with historically low gross margins and hard to pay debts.
- A new controller shareholder emerged after the panic caused when the company released its preliminary 4Q23 and announced that it had breached debt covenants.
- I believe PLCE's problems are self-inflicted and can be cured. With new equity raises on the horizon, it can reduce the risk of bankruptcy.
- PLCE is a hold and does not qualify for a concentrated bet, but may qualify for a speculative buy at these prices.
The Children's Place ( PLCE ) is an American apparel retailer focused on children's apparel.
The company has had three terrible years after the pandemic, caused by what I believe are some terrible management decisions—this led to the company leveraging and facing bankruptcy risks just weeks ago.
The panic caused by the potential default made the stock price fall more than 50%, at this point, a strategic investor (a value fund from Saudi Arabia) quickly purchased up to 54% of the company's stock . In the meantime, it provided an interest-free loan , and the company renegotiated some financing. I believe that this investor will try to equitize the company further via share rights and potentially increase its stake to 75%.
The new controller already has 4 board members (out of 10), and replaced the Chairman, while another 4 members are expected to resign before the end of March, at which point the new controller will control the Board. Further, in the May shareholder meeting, the controller will probably succeed in electing 11 members and renovating the whole Board....
Children's Place Can Recover And Could Be A Speculative Buy