Children’s Place’s stock pops 13% after investor group takes majority stake

But stock movement was choppy as investors also weighed the news that the unsolicited acquisition of the majority stake has triggered a Change of Control clause that is causing Children’s Place to be in default on its amended and restated credit agreement.

“The company is in discussions with its lenders to seek a waiver of the Event of Default,” it said in a statement.

The company said in the statement that it intends to accept Mithaq’s request to enter into discussions regarding the provision of financing to assist with the company’s liquidity needs.

The news comes just days after Children’s Place issued a profit warning for the fourth quarter and said it was working with lenders to secure new financing, news that sent its stock to a 21-year low.

The company said it would consider its strategic options if it failed to secure the funds needed to support operations.

The loss reflected pressure on margins resulting from discounting to maximize sales, as well as higher shipping costs as customers buy fewer items over several shipments.

Children’s Place is parent to brands including Gymboree, Sugar & Jade and PJ Place. The company has more than 500 stores in North America and wholesale marketplaces and distribution in 16 countries via six international franchise partners.

Monness Crespi Hardt downgraded the stock to neutral from buy last week, citing “continued execution missteps,” as well as new liquidity concerns.

“While management did not comment on expectations for fiscal 2024, we expect the company will lose money in the first half and need to build working capital ahead of the back-to-school season,” analyst Jim Chartier wrote in a note to clients.

The stock has fallen 69% over the last 12 months, while the S&P 500
SPX,
+0.96%
has gained 20.6%.