SQBG Stock Increases Over 25% Pre-Market: Why It Happened

By Amit Chowdhry ● July 22, 2021
  • The stock price of Sequential Brands Group Inc (NASDAQ: SQBG) increased by over 25% pre-market. This is why it happened.

The stock price of Sequential Brands Group Inc (NASDAQ: SQBG) increased by over 25% pre-market. Investors are responding positively to Sequential Brands Group revealing that on July 19, 2021, the company entered into an asset purchase agreement with Elan Polo International (the buyer), pursuant to which Sequential agreed to sell its 65% interest in DVS Footwear International LLC (DVS) for $2 million in cash consideration. And the sale closed on July 19, 2021.

The purchase agreement included customary representations, warranties, and covenants of Sequential and the buyer. And the purchase agreement also contained indemnification provisions pursuant to which Sequential has agreed to indemnify the buyer against certain losses, subject to the limitations set forth therein, including losses related to breaches of representations, warranties and covenants.

It’s also worth mentioning that there are ongoing defaults under the Third Amended and Restated First Lien Credit Agreement and the Third Amended and Restated Credit Agreement, both dated as of July 1, 2016 (credit agreements) with Bank of America administrative agent and collateral agent and Wilmington Trust, National Association as administrative agent and collateral agent, respectively. The lenders under the Credit Agreements provided a waiver of such defaults through August 10, 2021. The company had disclosed certain uncertainties and risks applicable to them in the previous Form 8-K filed on July 2, 2021 and July 8, 2021. 

The company Board of Directors is continuing to evaluate strategic alternatives, including refinancing all or a portion of their debt and/or the divestiture of one or more existing brands or a sale of the company — which divestiture or sale may occur pursuant to a case under the federal bankruptcy code. But the company said it cannot assure that any such divestiture or sale efforts will be successful or that such efforts will yield the overall best price for the assets, particularly if such events occurred through a restructuring or bankruptcy filing. And any sale of assets may represent a triggering event requiring that we evaluate the carrying value of such assets for impairment purposes, which impairments may be material.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.