SCHEDULE 13D/A: Baron Capital Opposes FIGS' Go-Private Bid, Enters into Significant Share Put-Call Agreement

Baron Capital Group, a major shareholder in FIGS, Inc., has publicly stated its opposition to the proposed 'going private' transaction and entered into a put-call agreement for a substantial block of shares, signaling active engagement in the company's future.

Summary

• Baron Capital Group and its affiliates (the "Reporting Persons") beneficially own 30,837,759 shares of FIGS, Inc. Class A Common Stock, representing 19.09% of the class.
• The Reporting Persons previously acquired these shares at an average price of $7.3662 per share.
• On December 31, 2024, the Reporting Persons informed FIGS, Inc. that they do not support the proposed "going private" transaction.
• The Reporting Persons intend to engage in discussions with FIGS' Board of Directors and management regarding the company's valuation, total stockholder return, investor messaging, operations, capital allocation, corporate governance, and strategic plans, including potential strategic transactions.
• On January 7, 2025, BAMCO, Inc. (part of Baron Capital Group) entered into a Put-Call Agreement with Thomas J. Tull, the Tull Family Trust, and First Light Investors, LLC (the "Sellers") concerning an aggregate of 27,833,825 shares of Class A Common Stock.
• Under the agreement, Sellers have the option to sell 19,039,999 "Tranche I Shares" to BAMCO, Inc. at a price of $6.25 per share between January 11, 2025, and May 7, 2025.
• For the remaining "Tranche II Shares" (up to 27,833,825 total shares minus any Tranche I shares sold), both Sellers and BAMCO, Inc. have options to sell/buy at $6.25 per share, effective after the HSR Act waiting period expires and until May 7, 2025.
• The Reporting Persons do not intend to seek Board representation at this time.

Sentiment

Score: 4

Explanation: The sentiment is mixed to slightly negative. While active investor engagement can be positive, the explicit opposition to a 'going private' transaction and the lower price in the put-call agreement compared to the investor's average acquisition cost suggest dissatisfaction with current valuation or strategic direction. The potential for significant changes in corporate structure or management also introduces uncertainty.

Positives

• A significant institutional investor (Baron Capital) is actively engaging with FIGS' management and Board to address valuation, corporate governance, and strategic direction, which could lead to improved shareholder value.
• The Reporting Persons have a long-term investment history with FIGS, indicating a vested interest in the company's success.
• The put-call agreement provides a structured mechanism for a large block of shares to potentially change hands, which could reduce market overhang or provide clarity on ownership.

Negatives

• Baron Capital's public opposition to the proposed "going private" transaction indicates a significant disagreement with the current strategic direction or valuation proposed by FIGS' management/Board.
• The average acquisition price of $7.3662 per share for Baron Capital's existing holdings is higher than the $6.25 per share price set in the put-call agreement, suggesting a potential unrealized loss on a portion of their investment or a lower valuation for the shares involved in the new agreement.

Risks

• The Reporting Persons may pursue various alternative courses of action, including extraordinary corporate transactions (merger, reorganization, liquidation), sale or transfer of material assets, changes in the present board of directors or management, material changes in capitalization or dividend policy, or other material changes in the Issuer's business or corporate structure.
• Potential for actions that may impede the acquisition of control of the Issuer by any person, or causing the Issuer's securities to be delisted from a national securities exchange or its registration terminated.
• The put-call agreement involves a significant block of shares (27,833,825 shares), and the exercise of these options could lead to substantial changes in the company's ownership structure.
• The transaction is subject to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) waiting period for Tranche II shares, which could delay the completion of that portion of the transaction.

Future Outlook

The Reporting Persons intend to engage in ongoing discussions with FIGS' Board and management regarding the company's valuation, total stockholder return, investor messaging, operations, capital allocation, corporate governance, and strategic plans, including potential strategic transactions. They will continuously review their investment and may explore various alternative courses of action, such as purchasing or selling additional shares, or proposing changes to the company's management, capital structure, or corporate structure.

Management Comments

• "The Reporting Persons do not support the proposed 'going private' transaction for the Issuer."
• "The Reporting Persons intend to have discussions with the Board of Directors of the Issuer (the 'Board') and management regarding the Issuer's valuation and total stockholder return, its investor messaging and disclosure, operations, capital allocation, corporate governance and the strategy and plans of the Issuer, including strategic transactions."
• "The Reporting Persons do not intend to seek Board representation."

Industry Context

This filing represents a significant instance of shareholder activism, where a major institutional investor, Baron Capital Group, is publicly challenging a company's strategic direction, specifically a 'going private' transaction. Such actions are common when investors believe management's plans do not adequately reflect shareholder value or corporate governance best practices. The engagement by a long-term investor like Baron Capital can often signal a desire for improved operational efficiency, capital allocation, or a re-evaluation of strategic alternatives within the apparel or healthcare apparel industry.

Comparison to Industry Standards

• The document does not provide specific comparable companies, projects, or results to assess the company's performance against global benchmarks. The focus is on a specific corporate governance and ownership dispute rather than operational or financial performance comparisons.

Management Changes

Corporate Governance

Legal Proceedings

• The document states there is no action, suit, investigation or proceeding pending, or to the knowledge of each Seller, threatened, against them before any arbitrator or any Governmental Authority that is reasonably likely to have a Material Adverse Effect on Sellers, or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.
• Similarly for the Buyer, there is no action, suit, investigation or proceeding pending, or to the knowledge of Buyer threatened, against Buyer before any arbitrator or any Governmental Authority that is reasonably likely to have a Material Adverse Effect on Buyer or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.

Related Party Transactions

• The Put-Call Agreement is between BAMCO, Inc. (part of Baron Capital Group) and Thomas J. Tull, the Tull Family Trust, and First Light Investors, LLC. Thomas J. Tull is a significant shareholder of FIGS, Inc., making this a transaction between major shareholders.

Stakeholder Impact

• Shareholders: Potential for increased shareholder value if Baron Capital's engagement leads to improved strategic decisions or a better valuation than the proposed "going private" transaction. Uncertainty regarding the outcome of the activist campaign and the large share transfer.
• Management/Board: Increased scrutiny and pressure from a major shareholder, potentially leading to changes in strategy or personnel.
• Employees, Customers, Suppliers, Creditors: Indirect impact depending on the outcome of strategic discussions and potential corporate changes. No direct impact mentioned.

Next Steps

• Discussions between Reporting Persons and FIGS' Board/management regarding valuation, total stockholder return, investor messaging, operations, capital allocation, corporate governance, and strategic plans.
• Potential communication with other shareholders and/or third parties by Reporting Persons.
• Exploration, development, and/or making of plans/proposals by Reporting Persons regarding their investment.
• Filing of Notification and Report Form pursuant to the HSR Act within 10 days of the agreement date (by January 17, 2025).
• Potential exercise of Tranche I Put Option by Sellers between January 11, 2025, and May 7, 2025.
• Potential exercise of Tranche II Put Option by Sellers or Call Option by Buyer after HSR Satisfaction Date and prior to May 7, 2025.

Key Dates

Recommendation

Keywords

FIGS Inc., Baron Capital Group, Schedule 13D, Activist Investor, Corporate Governance, Going Private Transaction, Put-Call Agreement, Shareholder Activism, Investment Management, Class A Common Stock, SEC Filing, Beneficial Ownership