Form 4: Fund 1 Investments, LLC Increases Economic Exposure to Tilly's, Inc. Through Cash-Settled Swaps

Fund 1 Investments, LLC and related entities have increased their economic exposure to Tilly's, Inc. through a series of cash-settled total return swap agreements, while disclaiming beneficial ownership of the underlying shares.

Summary

• Fund 1 Investments, LLC, along with Pleasant Lake Onshore Feeder Fund LP and Pleasant Lake Partners LLC, have entered into cash-settled total return swap agreements with an unaffiliated third party.
• These swaps provide economic exposure to Tilly's, Inc. common stock without granting voting rights or direct ownership of the shares.
• The transactions occurred on January 7, 2025, January 8, 2025 and January 10, 2025, involving 18,233, 120,000 and 35,000 notional shares respectively.
• The swap agreements are set to expire on December 27, 2027, but can be extended automatically for 12-month periods.
• The prices per share for the swaps were $4.3369, $4.1671 and $4.2157 respectively.
• The total number of notional shares the reporting persons have economic exposure to is 776,152.

Sentiment

Score: 5

Explanation: The document is a neutral disclosure of a financial transaction. It does not indicate positive or negative sentiment towards the company, but rather a strategic move by an investment fund.

Risks

• The reporting persons do not have voting rights or direct control over the underlying shares, which could limit their influence on the company.
• The value of the swaps is tied to the price of Tilly's, Inc. stock, which is subject to market fluctuations.

Industry Context

The use of cash-settled total return swaps is a common strategy for investors seeking economic exposure to a company's stock without direct ownership or voting rights. This allows investors to benefit from price movements without the responsibilities of direct shareholding.

Comparison to Industry Standards

• The use of total return swaps is a common practice among hedge funds and institutional investors to gain economic exposure to a stock without direct ownership.
• Similar strategies are employed by firms like Citadel and Renaissance Technologies, who often use complex derivative instruments to manage their positions.
• The specific terms of the swap agreements, such as the expiration date and extension clauses, are typical for these types of transactions.

Stakeholder Impact

• The increased economic exposure of Fund 1 Investments, LLC may signal confidence in Tilly's, Inc. to the market.
• The transactions do not directly impact the company's operations or financial statements.

Key Dates

Keywords

cash-settled swaps, economic exposure, Tilly's Inc, Fund 1 Investments, derivative securities, beneficial ownership, total return swap