Activists Have First Step Victory at Syms

Activist hedge fund managers at New York discount retailer Syms Corp. have reason to celebrate.

After pressing Syms Corp. for several months to reconsider its decision to delist from the New York Stock Exchange, the company agreed late Tuesday to re-register its stock with the Securities and Exchange Commission and list on the Nasdaq stock exchange.

“This is an unbelievable victory for minority shareholders,” said one investor.

Activist investors Barington Capital Group and Esopus Creek Advisors, who together own 9.8% of Syms, had been pressing for the company to stop its plan to deregister. It filed a lawsuit in in the Superior Court of the State of New Jersey alleging that Syms directors broke their fiduciary duty to investors by enabling the company to delist. The re-registering has rendered that suit moot.

Syms states that it had sought to de-register to avoid new costs, including those imposed by the Sarbanes-Oxley Act of 2002. But investors following the company contend that the real reason why Syms wants to deregister is to lower the value of the stock price so that management, including store founder Sy Sims, 81, could complete a management-led buyout at an inexpensive valuation leaving shareholders with lost value. According to a regulatory filing, Syms disclosed that they have approximately 413 holders of record.

Syms delisted from the NYSE on Jan. 14 and sought to deregister its shares on April 1. Barington Capital Group and Esopus Creek Advisors sent a letter to Syms’ board earlier this month expressing their displeasure with the company's decision to deregister. “The group believes that such actions will destroy shareholder value,” Barington and Esopus Creek wrote in the letter that was attached to a Schedule 13D filing with the SEC.

But investors believe the registration is only a first step towards improving the company’s share value. The activists and some value investors have sought to have Syms find ways to monetize its real estate assets. “If the company really wanted to help shareholders, they would do an appraisal of the real estate and let the marketplace know what it’s worth,” said another investor. -- Ron Orol