Can Dov Charney Regain Control of American Apparel?

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July 1 (Bloomberg) -- NYU's J.P. Eggers, John Weinberg Center for Corporate Governance's Charles Elson and PMG Venture Group's Kristin Bentz discuss American Apparel founder Dov Charney gearing up to take his fight for control of the clothing retailer directly to shareholders. They speak with Trish Regan on "Street Smart." (Source: Bloomberg)


Without the poison pill, if he can find himself a way to get him back in controlling shares, he can find a way backend.

The fact that this is one of the most entrenched ceos in corporate history ousted by his board full of friends suggest there's no way they are going to let it happen without a serious fight the stop what does the poison pill get at here?

It gives the board the ability to stop them from increasing his position from his current holdings.

He cannot cross 50% and get over the 40 some odd percent he has accumulated today.

So frankly it stops him in his tracks.

Can he influence other holders to join his side?

It is a great story filled with all kinds of legal questions us professor types love.

Can he get anyone on his side?

This is a guy who is scandal seems to be his middle name.

Why would anybody be willing to go with him at this point when the stock is doing so well without him?

Dov charney is kind of the don draper of ceos and founders.

As long as the money is there, everyone turns a blind eye to his behavior.

He's also the pied piper of deviance and is very charismatic will stop he believes what he believes in very deeply.

He loves drama and he loves a good fight and if he gets in front of the right people and makes his pitch, he may have a chance.

But at this point, -- people are done.

It is fascinating.

Some of these former ceos and founders of these entities, big personalities, and it's good for only so long.

It gets you there.

As long as the business is going well.

You know the situation with chip wilson at lululemon.

Granted, he stepped back more or less voluntarily from the business after making some very public comments to you that backfired on him.

Look at george cymer at nds warehouse.

The strategy went well until the business starts to falter a little bit and then you see the founder seeing opposition from the board.

But it is remarkable in this case that the board was very close with him.

These are his friends, right?

He sort of hand-picked this board.

This is a board of technically outsiders that they have been his close friends for a long time and this is the board he created.

They have a fiduciary duty.

This is a publicly traded company.

How long can you leave a guy like him in the seats when there are those kinds of problems in your trading for less than a dollar.

You have to respect their decision.

Particularly aboard picked by a founder to revolt against the founder.

You have to expect they have good reasons to do so.

To expect they will change course seems rather unlikely.

It is an extra to remove and i've never seen anything quite like it.

The interesting thing is the stock is trading low and he managed the company for a long time and on his watch, the stock fell.

He's basically buying back shares at a low through management that some would argue led to the stocks low.

It is an amazing story.

It is kind of having your cake and eating it too.

I want to ask about who else could lead this company?

This is something i've been wondering since this story began.

Dov charney's identity is so tied up with what american apparel is an recently that has not worked as well.

But nonetheless, who else could represent american apparel and be the image of it in a way he has been?

I think he has done the best to create that image and i think that image can go on without him.

I said this a long time ago -- they just needed grown-up at the table.

They need a strong, charismatic ceo that understands the passion of the company, that blue state hipster kind of thing.

But they need someone who can run a business and not molest employees.

How hard is that?

You're not asking for much there but it's hard for this guy to deliver.

The close themselves -- the clothes themselves and the business itself, does that need a lot of work?

It was successful for some time but how many different color t-shirts or tights can you make?

Don't you need to advance it be on that?

It's interesting.

What gave american apparel its edge is that it came in at a time when that teenager was done with abercrombie & fitch.

They cared more about establishing their own look on a budget and making their own custom look.

He's done that and conquered that global hipster look.

I really don't inc.

The apparel actual differentiated self.

You can't spot and american apparel abt -- baby t. taking the cachet that they used, using sex to sell, putting it at a different context.

At the same time, they've run out of growth opportunities as an organization.

There's only so many types of those shirts you can sell and given the fact it is undifferentiated and any benefits they've had two profits recently have been by cutting costs will stop -- by cutting costs.

They may actually need new product.

What happens next?

Where do we take it from here?

Anybody's guess.

He's got a tough battle from a but on the other hand he has a big chunk of the company stock.

The fact that he has us than a majority means the others could take a very different position and not support them.

He was ousted, there were management issues, and he has to make the case he can change his stripes.

That's a tough case to make.

Given the fact that this board revolted.

We are going to leave it there.

Thank you so much.

Coming up, everyone guilty as

This text has been automatically generated. It may not be 100% accurate.


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