Insider Activity: Francesca’s Holdings Corporation (FRAN)

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  • Large fund owner more than doubles stake.

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  • On Thursday, Cross River Capital Management more than doubled their stake in Francesca’s Holdings Corporation (FRAN). They did so by buying 341,973 shares of the retailer, shelling out over $625,000.

    As the trade occurred below market rates, the additional number of shares was achieved off-market, and likely the result of the fund’s prior debt investments in the company converting to shares at a lower rate.

    Francesca’s is a boutique apparel retail company with 727 boutiques in 47 states. The company is focused on gifts for women between the ages of 35. The company is currently running at a loss, and has over $275 million in debt against a mere $11 million market cap for shares.

    Action to take: Physical retail operations can be tough—and this looks like no exception. With this company’s particularly heavy debt load, investors would be better to avoid shares rather than buy here.

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  • Changing debt to cash, as seems to be what the company’s major fund investor is doing, can help the balance sheet, but it does so in a way that dilutes shareholders. So even if the company survives, shareholders may not see any capital gains in this company for the foreseeable future.