The drama around American Apparel (APP) took strange turn Friday after founder Dov Charney told Bloomberg TV that he was double-crossed by a hedge fund he had turned to for help to take the company private. He also claimed to be down to his last $100,000 and was sleeping on a friend's couch in New York City.
Earlier this year, Standard General loaned Charney, a Canadian native who launched American Apparel in 1989, about $20 million so that he could increase his ownership stake to 40 percent. In exchange, Charney gave up his voting rights. Standard General pushed for the company to replace its board and, much to Charney's chagrin, backed his ouster as well.
Charney told Bloomberg's Trish Regan that Standard General reneged on its promise to help restore him to a leadership role at American Apparel once the investigation into allegations of sexual misconduct was completed. He said he saw Standard General's support of his ouster as a betrayal, according to Regan. Charney has filed numerous lawsuits to regain control of American Apparel. Standard General refuted his claims.
"As we have stated previously, our objective is to help American Apparel grow and succeed," the firm said in a statement. "We supported the independent, third-party and very thorough investigation into the allegations against Mr. Charney, and respect the Board of Director's decision to terminate him based on the results of that investigation."
Meanwhile, shares of Los Angeles-based American Apparel climbed 6.5 percent to $1.14 on Monday after it received a buyout offer from an investor group backed by private equity firm Irving Place Capital, according to Bloomberg.
Irving Place is "open" to retaining Charney "in some capacity," the news service said, without providing any specifics. The offer values American Apparel at $226 million to $243 million ($1.30-$1.40), as much as a 23 percent premium over where the stock recently traded. The fact that the stock hasn't moved to the level of the offer price indicates that many on Wall Street are skeptical that it will happen.
Irving Place Capital didn't respond to request for comment, and American Apparel declined to elaborate beyond its previously released statements.
Charney was suspended as American Apparel president and CEO in June for a litany of misdeeds including violating policies and charging the company for personal expenses. He also has faced numerous sexual harassment lawsuits and has made headlines for his erratic behavior for years. For instance, Charney showed up unexpectedly at Bloomberg's headquarters to talk to Regan.
While the claims against him were being investigated by an outside company, Charney served as a consultant to American Apparel. That relationship has since been terminated. Veteran fashion executive Paula Schneider has been named to replace Charney as CEO.
Under Charney's leadership, American Apparel has struggled recently, generating $210 million in net losses since 2010, and Wall Street analysts expect the losses to continue for the foreseeable future.
Bloomberg has also reported that 30 American Apparel executives have asked the company, which operates 245 stories in 20 countries, to reinstate him.