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

Fund 1 Investments, LLC and 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 28, 2025, swaps were entered into for 110,000 notional shares at a price of $3.7725 per share.
• On March 3, 2025, swaps were entered into for 135,000 notional shares at a price of $3.7968 per share.
• On March 4, 2025, swaps were entered into for 50,000 notional shares at a price of $4.0264 per share.
• Following these transactions, the reporting persons have economic exposure to a total of 1,759,349 shares through these swap agreements.
• 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 document indicates increased economic exposure, which could be interpreted as a moderately positive signal. However, the disclaimer of beneficial ownership and the use of swaps introduce some complexity.

Positives

• Increased economic exposure to Tilly's Inc. may indicate confidence in the company's future performance.

Risks

• The reporting persons do not have voting rights or direct control over the disposition of the underlying shares.
• The value of the swaps is tied to the price of Tilly's Inc. stock, exposing the reporting persons to market risk.

Future Outlook

The swap agreements expire on December 27, 2027, but can be automatically extended for successive 12-month periods unless written notice is provided.

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 or having voting rights. This strategy allows them to participate in the potential upside of the stock while managing capital and regulatory requirements.

Comparison to Industry Standards

• Total return swaps are a common tool used by hedge funds and investment firms to gain exposure to assets without direct ownership.
• The size of the swap positions (1,759,349 shares) is relatively small compared to the overall market capitalization of Tilly's, Inc., suggesting a moderate level of investment.
• Comparable companies and funds often use similar strategies to manage their exposure to various assets.

Stakeholder Impact

• The increased economic exposure could potentially influence investor sentiment towards Tilly's Inc.
• The transactions themselves are unlikely to have a direct impact on employees, customers, or suppliers.

Key Dates