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. common stock through a series of cash-settled total return swap agreements.

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.
• The reporting persons disclaim beneficial ownership of the subject shares except to the extent of their pecuniary interest.
• On February 20, 2025, swaps were entered for 35,000 notional shares at a price of $3.7844 per share.
• On February 21, 2025, swaps were entered for 15,000 notional shares at a price of $3.6467 per share.
• On February 24, 2025, swaps were entered for 15,000 notional shares at a price of $3.6577 per share.
• The swap agreements expire on December 27, 2027, but can be automatically extended for successive 12-month periods unless written notice is provided.

Sentiment

Score: 6

Explanation: The sentiment is neutral. The document simply reports transactions related to cash-settled total return swaps. While the increased exposure could be interpreted as a positive signal, it's not definitive.

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. common stock, exposing the reporting persons to market risk.

Future Outlook

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

Industry Context

Cash-settled total return swaps are a common tool used by investment firms to gain economic exposure to a company's stock without directly owning the shares or having voting rights. This strategy allows firms to benefit from potential stock appreciation while limiting their direct involvement in corporate governance.

Comparison to Industry Standards

• Hedge funds and investment firms frequently use total return swaps to gain exposure to equities without the full commitment of direct ownership, similar to strategies employed by firms like Pershing Square or Elliott Management.
• The size of the swap positions (35,000 and 15,000 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 investor sentiment towards Tilly's Inc.
• The swap agreements do not directly impact employees, customers, or suppliers.

Key Dates

Keywords

Tilly's Inc., TLYS, Fund 1 Investments, Pleasant Lake Partners, PLP Funds Master Fund, cash-settled total return swap, economic exposure, beneficial ownership, Form 4