Foothill Ranch, CA—No resolution appears in sight in the proxy battle at Wet Seal that has pitted the young women’s retailer’s board against the Clinton Group Inc., a New York-based activist investor and third largest shareholder.
After the board earlier this week touted the results of two independent proxy advisers who apparently issued opinions against Clinton Group’s recommendations, the Clinton Group fired back Thursday saying one of those proxy advisers, Institutional Shareholder Services (ISS) “and other independent research analysts” supported its proposal to“elect two highly qualified independent professionals, Lynda K. Davey and Mindy C. Meads, to the Wet Seal Board in place of incumbent directors Sidney M. Horn and Henry D. Winterstern.”
“Noting that Clinton Group had ‘made a compelling case for a change,’ ISS specifically recommends that Wet Seal stockholders ‘do not vote’ for the status quo, as the company has advocated,” Clinton Group said in a statement.
“We are disappointed that the company sought in its press release yesterday to mischaracterize ISS’ recommendation,” said Gregory P. Taxin, managing director of Clinton Group, which holds a 6.9% stake in Wet Seal.
Citing other investment analysts who also apparently agreed a change is needed on the board, Taxin added, “We believe Wet Seal stockholders should indeed support our proposals and upgrade the Board of the Wet Seal.”
Board: ‘Clinton Group No White Knight’
Earlier this month, Clinton Group filed with the Securities & Exchange Commission to seek written consent from shareholders to remove and replace four Wet Seal board member and fill a vacant seat all with its own nominees.
But Wet Seal executives told shareholders in their letter that the Clinton Group is focused on “short-term activism rather than the long-term interests of all shareholders.”
Wet Seal, which is trying to turn itself around after posting a $12.4 million loss in its second quarter and a forecast loss for its third quarter, had adopted a fast fashion strategy since it fired CEO Susan McGalla.
Meanwhile, last week it added former Wet Seal CEO Kathy Bronstein and former Charlotte Russe CEO John Goodman to the board.
“We are confident that in the upcoming quarters you will see the significant financial impact of this board’s focus and stewardship,” the board said in its letter to shareholders.
The board’s letter also made it clear that they didn’t think the Clinton Group’s nominees had the right merchandising and operational experience Wet Seal’s turnaround would need, not to mention questioning Clinton Group’s agenda.
“Clinton Group is not a ‘white knight’ to fellow shareholders and this board. To the contrary, Clinton has a track record of being an opportunist that is specifically focused on extracting short-term gains, often at the expense of other shareholders, management teams and boards,” the letter stated.
The fight continues between the two camps and so do the problems faced by Wet Seal. In addition to “revolving door of chief executives” the specialty retailer was hit in July with a racial discrimination lawsuit by several African American workers.