Vince Holding Corp. (VNCE) Mislead Investors Regarding its Systems Migration Efforts
According to the recently filed class action complaint, Vince Holding Corp. (VNCE) made a series of misstatements and bad business decisions that resulted in a devastating loss of market value for the company. Vince is majority owned and controlled by private equity firm Sun Capital Partners, Inc. and its affiliates, and was formed from assets of Kellwood Company, which was wholly-owned by Sun Capital. After the initial offering, Vince relied on certain administrative, financial, operational, and other support services provided by Kellwood. Eventually, Vince migrated these services to its own systems and those provided by third parties. Despite assurances from company executives that the transition was a smooth one, in reality, issues with the new systems impeded the ability of stores to timely process credit card transactions, and resulted in delivery delays, inventory systems failures, and lost customer transactional data. As the quality of the customers’ experience with the company deteriorated, Vince’s sales plummeted. Vince belatedly acknowledged the implications of its migration efforts after sales and earnings shortfalls, and warned that the new systems had led to one or more material weaknesses in its internal controls over financial reporting and systems infrastructure. Vince’s market capitalization, estimated at more than $1 billion following the IPO, was valued at just over $47 million and at risk of being delisted from the New York Stock Exchange at the end of the class period.
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