J.Jill sells clothing and accessories for women ages 40-65 and it has a “loyal, engaged, and affluent” customer following, but according to the complaint for this class action, the information provided in the Registration Statement for its March 2017 IPO was insufficient to provide investors with a true picture of the company’s prospects. The complaint claims that the omissions from the Registration Statement amount to violations of the Securities Act of 1933.
The class for this action is all persons who bought shares of J.Jill common stock in, or traceable to, the false and misleading Registration Statement issued in connection with the company’s initial public offering (IPO) on or about March 9, 2017.
According to the complaint, an accurate picture of J.Jill’s prospects was particularly important due to an increase in its debt and the need to determine if it could carry that debt.
One of the defendants in this case, private equity firm TowerBrook, acquired J.Jill in May 2015 and, in the time leading up to the IPO, increased the J.Jill debt load to $274 million, purportedly to make improvements and boost sales, although the clothing company’s net income for the fiscal year ending January 31, 2015 was only $10.3 million. Part of the reason for the debt increase was a dividend of $70 million paid to partners in an investment vehicle associated with TowerBrook in May 2016.
While IPOs can be used to raise money to pay down debt, the complaint claims, in this case TowerBrook intended to keep the entire proceeds for itself, with nothing going to J.Jill. Tower intends to retain its control of J.Jill even after the IPO.
J.Jill sells through retail stores, a website, and its catalog, and it portrayed itself as having superior sales and marketing approaches. However, the complaint alleges that the Registration Statement was misleading in not disclosing the following:
The complaint alleges that on October 12, 2017, J.Jill shares were selling at $4.86, more than a 62% decline from the $13 at which they were sold at the IPO only seven months earlier.