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, increasing their economic exposure to Tilly's, Inc. (TLYS) common stock.
• These swaps provide economic results comparable to ownership of the shares, but the reporting persons do not have the power to vote or direct the voting or dispose of the shares.
• The transactions occurred between January 13, 2025, and January 15, 2025.
• The swap agreements expire on December 27, 2027, but can be automatically extended for successive 12-month periods unless written notice is provided.
• The reporting persons disclaim beneficial ownership of the subject shares except to the extent of their pecuniary interest.

Sentiment

Score: 5

Explanation: The document is a neutral regulatory filing detailing transactions. There is no inherent positive or negative sentiment.

Risks

• The value of the cash-settled total return swaps is tied to the price of Tilly's Inc. common stock, exposing the reporting persons to market risk.
• The reporting persons do not have voting rights or control over the disposition of the underlying shares, despite having economic exposure.

Future Outlook

The swap agreements will automatically extend 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 maintaining flexibility and potentially avoiding certain regulatory requirements associated with direct ownership.

Comparison to Industry Standards

• Hedge funds and investment firms frequently use total return swaps to gain exposure to equities without direct ownership, similar to strategies employed by firms like Pershing Square or Elliott Management.
• The size of the notional exposure, approximately $400,000, is relatively small compared to the overall market capitalization of Tilly's Inc., suggesting a targeted investment strategy rather than a broad activist stake.
• The use of cash-settled swaps is a standard practice, comparable to how other institutional investors manage risk and exposure in their portfolios.

Stakeholder Impact

• The increased economic exposure to Tilly's Inc. by Fund 1 Investments, LLC and related entities could potentially influence investor sentiment and trading activity in TLYS shares.
• The swap agreements do not directly impact the company's operations or financial performance.

Key Dates