Over the past couple of weeks American Apparel’s stock has tumbled to under a dollar, and is currently trading at around 81 cents. Shareholders are not happy, having seen their American Apparel stock tumble to an all-time low of 66 cents this year, and feel misled, leading to the threat of a third class-action suit within the past two weeks, according to L.A. Weekly. Attorney Howard G. Smith is representing the latest suit, alleging that the store “violated federal securities laws by issuing material misrepresentations to the market concerning American Apparel’s operations and financial performance.” Another potential class-action suit that arose before that accuses American Apparel of misleading investors when CEO Dov Charney said that his company would remain unaffected when more than 1,500 workers had to be let go as result of immigration reform.
However, Fast Company reported this week:
In a weekly conference call today with international stores and corporate heads, the AA chief blamed a lack of immigration reform and media misunderstandings for the company’s woes. According to a source listening to the call, Charney disputed reports that the company is nearing bankruptcy and out of cash. Rather, he said, one of the core issues is AA’s employment troubles. “The real core issue is we lost 2,500 people,” Charney said, referring to what American Apparel attorney and spokesman Peter Schey calls a “routine” 18-month investigation and early 2010 immigration and customs enforcement action that resulted in the loss of workers, many of whom didn’t have proper immigration documents. (Schey tells Fast Company the number of employees shed after the enforcement action was more like 1,500.)
And still a third suit accuses the company of throwing similar types of shade by misrepresenting itself to shareholders and hurting its image. Earlier this week, the New York Stock Exchange threatened — and not for the first time — to delist American Apparel if they can’t prove they’ll get their act together by November as they operate under the increasingly likely possibility of filing for bankruptcy. Oh, and by the by, they’re about $120 million in debt.
American Apparel Faces Third Shareholder Lawsuit In Two Weeks [L.A. Weekly]