SCHEDULE: Fund 1 Investments Takes 28.8% Stake in Tile Shop, Opposes Delisting

Fund 1 Investments, LLC has disclosed a 28.8% beneficial ownership in Tile Shop Holdings, Inc. and plans to engage with management regarding the company's proposed delisting and strategic direction.

Summary

• Fund 1 Investments, LLC reported beneficial ownership of 12,859,012 shares of Tile Shop Holdings, Inc. common stock, representing approximately 28.8% of the outstanding shares.
• The aggregate purchase price for these shares was approximately $76,358,266, including brokerage commissions.
• The Reporting Person believes the shares were undervalued and represented an attractive investment opportunity.
• Tile Shop Holdings, Inc. announced on October 6, 2025, a Deregistration Plan to delist from Nasdaq, suspend SEC reporting, and terminate registration following a proposed reverse stock split, pending stockholder approval in December 2025.
• Fund 1 Investments intends to discuss the Deregistration Plan, corporate governance, stockholder rights, and strategic opportunities with the Board and management.
• The Reporting Person also holds cash-settled total return swap agreements providing economic exposure to an additional 902,113 notional shares, representing approximately 2.0% of outstanding shares, without voting rights.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive from the activist investor's perspective, as they see the company as undervalued and intend to drive value. However, the company's proposed delisting plan introduces uncertainty and potential negatives for public shareholders, balancing the overall sentiment.

Positives

• Fund 1 Investments believes Tile Shop Holdings, Inc. shares were undervalued, indicating potential for appreciation.
• The Reporting Person intends to engage with management to enhance stockholder value, potentially leading to improved corporate governance and strategic direction.

Negatives

• Tile Shop Holdings, Inc.'s proposed Deregistration Plan, including delisting from Nasdaq and suspending SEC reporting, could reduce liquidity and transparency for public shareholders.
• The plan involves a reverse stock split, which can sometimes be viewed negatively by the market.

Risks

• The proposed Deregistration Plan, if approved, could lead to reduced liquidity for shares and less public information available about the company.
• The Reporting Person's activist stance may lead to disagreements with current management or the Board, potentially causing instability.
• Future actions by the Reporting Person, such as selling shares or engaging in short selling, could impact the stock price.

Future Outlook

Fund 1 Investments intends to review its investment continuously and may take various actions, including engaging in further discussions with management and the Board, making recommendations on capitalization or Board structure, and potentially increasing or decreasing its stake. The Issuer's future involves a proposed Deregistration Plan, including delisting and termination of SEC registration, pending stockholder approval.

Management Comments

• A committee of independent directors has recommended, and the Issuer's Board of Directors has approved, a plan to delist the Shares from trading on the Nasdaq Capital Market, suspend the Issuer's duty to file periodic reports and other information with the U.S. Securities and Exchange Commission, and to terminate the registration of the Shares under the federal securities laws following the completion of a proposed reverse stock split.

Industry Context

This filing highlights an activist investor taking a significant stake in a retail company (Tile Shop Holdings, Inc.) that is pursuing a strategy of going private or significantly reducing its public reporting obligations. Such moves can be driven by a desire to reduce regulatory costs, gain more operational flexibility, or address perceived undervaluation away from public market scrutiny. Activist investors often target companies they believe are mismanaged or undervalued, seeking to influence strategic decisions.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for reduced liquidity and transparency if the Deregistration Plan is approved. Fund 1 Investments' engagement could lead to enhanced shareholder value or conflict.
• Management/Board: Will be subject to discussions and potential influence from a significant activist shareholder regarding strategic direction and corporate governance.
• Regulatory Authorities: The company's intent to suspend SEC reporting and terminate registration will reduce its oversight by the SEC.

Next Steps

• Special meeting of Tile Shop Holdings, Inc. stockholders expected in December 2025 to vote on the Deregistration Plan.
• Fund 1 Investments intends to engage in discussions with the Board and management regarding the Deregistration Plan, corporate governance, stockholder rights, and strategic opportunities.
• Fund 1 Investments may increase or decrease its position in the Issuer, make recommendations, or engage in other transactions related to its investment.

Key Dates

Recommendation

The filing presents a mixed bag. On one hand, a significant activist investor sees value and intends to drive improvements, which could be positive. On the other hand, the company's proposed delisting and deregistration plan introduces substantial uncertainty, reduces liquidity, and limits future public information, which are generally negative for public shareholders. Given these conflicting signals and the pending stockholder vote, a 'hold' recommendation is appropriate until there is more clarity on the Deregistration Plan's outcome and the nature of Fund 1 Investments' influence. Investors should monitor developments closely.

Keywords

Tile Shop Holdings, Fund 1 Investments, Schedule 13D, Activist Investor, Deregistration Plan, Nasdaq Delisting, Reverse Stock Split, Corporate Governance, Shareholder Value, TSM