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

Fund 1 Investments, LLC, along with related entities, 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, Pleasant Lake Partners LLC, and PLP Funds Master Fund LP have entered into cash-settled total return swap agreements with an unaffiliated third party, providing them with economic exposure to Tilly's Inc. (TLYS) common stock.
• These swaps do not grant the reporting persons the power to vote or direct the disposition of the underlying shares.
• On February 14, 2025, swaps for 30,000 shares were entered at a price of $3.8857 per share.
• On February 18, 2025, swaps for 5,000 shares were entered at a price of $3.8882 per share.
• On February 19, 2025, swaps for 35,000 shares were entered at a price of $3.8007 per share.
• Following these transactions, the reporting persons' total number of derivative securities beneficially owned is 1,399,349.
• The swap agreements expire on December 27, 2027, but can be automatically extended for successive 12-month periods.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. The increased economic exposure suggests a potentially positive outlook on Tilly's, but the disclaimer of beneficial ownership tempers the enthusiasm.

Positives

• The increased economic exposure suggests a potentially positive outlook on Tilly's Inc. by Fund 1 Investments, LLC and related entities.

Risks

• The reporting persons disclaim beneficial ownership of the underlying shares, limiting their direct influence on the company.
• The value of the swaps is tied to the price of Tilly's Inc. stock, exposing the reporting persons to market risk.
• The swap agreements are subject to counterparty risk with the unaffiliated third-party financial institution.

Future Outlook

The swap agreements have an expiration date of December 27, 2027, but can be automatically extended for successive 12-month periods unless either party provides written notice of non-extension.

Industry Context

Hedge funds and investment firms commonly use total return swaps to gain economic exposure to a company's stock without directly owning the shares. This strategy allows them to benefit from potential price appreciation while maintaining flexibility and potentially avoiding certain regulatory requirements associated with direct ownership.

Comparison to Industry Standards

• Total return swaps are a common tool used by investment firms like Fund 1 Investments to gain exposure to companies like Tilly's without direct ownership.
• Other firms such as Renaissance Technologies and Citadel also use similar strategies to manage their investment positions.
• The size of the swap positions (70,000 shares) is relatively small compared to the overall market capitalization of Tilly's, suggesting a tactical rather than strategic investment.

Stakeholder Impact

• The increased economic exposure could potentially influence the market perception of Tilly's Inc., affecting shareholders.
• The transactions themselves have no direct impact on employees, customers, suppliers, or creditors.

Key Dates

Keywords

Tilly's Inc., TLYS, Fund 1 Investments, Pleasant Lake Partners, PLP Funds Master Fund LP, Cash-Settled Total Return Swap, Economic Exposure, Derivative Securities, Beneficial Ownership