American Apparel has adopted a one-year stockholder rights plan to prevent the ousted chief executive Dov Charney from gaining control of the company he founded.
The Los Angeles-based retailer in a statement said that the move is designed to limit the ability of any person or group, including Charney, “to seize control of the company without appropriately compensating all American Apparel stockholders.”
The embattled clothing chain added that the rights will be “attached to all shares of common stock.”
Each right will let the holder purchase one ten-thousandth of a share of preferred stock at an exercise price of $2.75.
“The special committee believes this plan is an important tool to ensure that all American Apparel stockholders are treated fairly,” the statement said.
In a recent securities filing, Charney revealed that he has partnered with New York investment firm Standard General to increase his 27.2% stake in American Apparel.
If Standard General is able to acquire more than 10% of the retailers’ shares, it will effectively hand control of those shares to Charney.
The retailer has posted annual losses since 2010. In 2013, the company posted a loss of $106.3m on revenue of $633.9m, compared with a loss of $37.3m on revenue of $617.3m in 2012.