Iconix Brand Down 83%: Hedge Fund Manager Takes Rudder

Steve Kanaval |

Shares of Iconix Brand Group (ICON) are down 83% to $5.67 after starting 2015 at $34 per share. I want to speak with Peter Cuneo Chairman of the Board and Interim CEO with shares at $5.67 down 83% for the year. In recent years, Cuneo has served as senior advisor to a large distressed and special situations hedge fund co-investing in select private companies in the consumer and media sectors. Cuneo is a recognized leader in business turnarounds. Since 1983, he has completed seven turnarounds of distressed branded business. From 1999 to 2009, Peter played a lead role in the turnaround of Marvel Entertainment Inc. (NYSE – MVL). This culminated in its $4.5 billion sale to Disney at the end of 2009.

Let's look at a chronology of events:

March 30, 2015 the Company announced that its Chief Financial Officer Jeff Lupinacci resigned, shares fell 7%, to close at $33.67 per share on unusually high volume.

April 17, 2015 the Company’s Chief Operating Officer Seth Horowitz resigned after serving one year. The Company stated that it did not intend to name a new COO.

April 20, 2015: Roth Capital Partners, published an Equity Research Note, criticizing the Company’s alleged accounting irregularities concerning free-cash flow accounting, organic growth, and gains on licensing fees. Shares fell 20%, to close at $25.41 per share, on unusually heavy volume.

August 6th, 2015: the boutique firm called Monnes Crespi & Hardt has decided to upgrade the stock rating to Buy from Neutral. That Buy rating came with an $18 price target. Concerns remained in this upgrade, and it looked like more of a valuation call, with a note about its current earnings multiple at half of what it was over the past three years on average. The main concern is over organic growth, although this is said to be well-known and should be priced in on a risk-reward basis. Another additional positive (so thought MC&H) is that management set a low bar ahead on guidance, with several positive catalysts ahead. Shares traded down 60%+ from here. Not sure I would be following Monnes Crespi.

August 11, 2015: the Company announced earnings and sales that fell below analysts’ expectations, and also reported that CEO and Founder, Neil Cole, had resigned his executive and director positions.

September 6th 2015: Huber Capital Management, added to its stakes in Iconix Brand, according to new 13Gs filed with the SEC. Joe Huber’s investment firm disclosed owning 5.55 million shares of Iconix Brand Group, accounting for 11.50% of its outstanding common stock. Shares lost half their value from here. What is this guy going to do with his shares. His investors cannot be happy?

There is zero chance this stock is not a value here. Certainly worth watching this stock in 2016 with Cuneo and Sons at the helm....note the price level we are watching at $5.67. We have no position in this stock...but jeez this set up looks interesting.

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Companies

Symbol Name Price Change % Volume
ICON Iconix Brand Group Inc. 9.15 0.29 3.27 382,994

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