Tilly’s IPO Moving Forward; Another S1 Amendment is Filed

Not much is different in this filing, but we do get a few additional pieces of information. You can review what I wrote about their initial filing last July here. I updated that analysis in March of 2012 when they released their numbers for the year. My opinion hasn’t changed and I think the analysis is still valid.

What we learn from the newly amended S1 is that the share price of the offering is expected to be between $11.50 and $13.50. They expect to raise about $86.4 million (assuming a $12.50 a share price). Of that amount $84 million will go to the existing shareholders and only $2.4 million will be available to be utilized in the business. Here’s how the filing puts it:

“The principal purposes of this offering are to obtain capital to pay all undistributed cumulative earnings to date to the current shareholders of World of Jeans & Tops [the former corporate name of Tilly’s], obtain additional capital, create a public market for our common stock and facilitate our future access to the public equity markets….We expect to use $84.0 million of the net proceeds from this offering to pay in full the principal amount of the notes, as well as any accrued interest. Therefore, our stockholders immediately following this offering, who were also the shareholders of World of Jeans & Tops prior to termination of its “S” Corporation status, will receive most of the net proceeds from the sale of shares offered by us.”
 
When the offering is done, there will be Class A and Class B common stock. Purchasers of the offering will get the Class A, which has one vote per share. The Class B common stock has ten votes per share.
 
As a result, “The Shaked and Levine family entities [current owners of Tilly’s and the only ones who can own the Class B shares] will control approximately 96% of the total voting power of our outstanding common stock following the completion of this offering. As a result, the Shaked and Levine family entities will be able to control the outcome of all matters submitted to a vote of our stockholders…”
 
Tilly’s numbers for last year, as I discussed in my March article, were strong. It will be interesting to watch how the offering is received. 

 

 

6 replies
  1. Rob Valerio
    Rob Valerio says:

    Jeff-

    I sense you have the same question as the one ringing in my head: why would ANYONE invest money in a retail venture that all their investment goes to the controlling shareholders?

    I’m raising money for a variety of ventures right now, and the 10x voting goes over ok, but all investors are looking for the money to fund future growth, not line the pockets of partners. Who are these generous class “A” shareholders?

    Reply
    • jeff
      jeff says:

      Hi Rob,
      Well, I didn’t want to come out and say it quite that directly, but I’m with you. I don’t and won’t buy the stock of anything I write about, but I wouldn’t touch it for just that reason. I mean, maybe the company will do great and the stock go up, but it just doesn’t feel good. As to who the generous class A shareholders are, it’s the job of the underwriting investment banks to find them.

      See you at the skate industry conference?

      j.

      Reply
    • jeff
      jeff says:

      Hi Bob,
      It’s not that Tilly’s owners haven’t done a good job growing the business, and it’s not that they don’t deserve a payday for their success, but somehow it feels like I’d be making a charitable donation instead of investing my money to help the business and stock price grow if I bought this stock.

      Thanks,
      J.

      Reply
  2. chuck
    chuck says:

    It would sound sooooo much better if the distribution was smaller, just enough to cover the taxes created on the conversion and that the reset of the money the B shareholders want be structured as a dividend over the next 60 months based on the company hitting certain benchmarks. I am not an SEC expert so I am not sure that is possible to structure.

    With the upcoming “Taxilla” coming 12/31/12 we are going to see some pretty interesting deal structures.

    Reply
    • jeff
      jeff says:

      Hi Chuck,
      Yes, it is kind of a deal in search of a fig leaf. I hadn’t thought about the impact of the upcoming tax hikes on deals but you’re right of course. Some of the stuff I’ve been reading suggests that between the tax hikes, assuming they stand, and the impact of the stimulus running out we’re looking at like a 3.5% hit to GDP, which is kind of a lot.

      J.

      Reply

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