What Happened?

Shares of healthcare apparel company Figs (NYSE:FIGS) jumped 17.7% in the morning session after The Wall Street Journal reported that private equity firm, Story3 Capital made an offer to acquire the company. The offer came in at roughly $1 billion, or $6 per share. This represents a 15% premium to the stock's last close price before news of the acquisition became public. The report also revealed that Story3 already owns 1% of FIGS' common stock, signaling a long-standing interest in the company. In its proposal, Story3 mentioned Fortress Investment Group, one of its partners, is ready to fund the acquisition with debt financing.

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What The Market Is Telling Us

Figs’s shares are extremely volatile and have had 40 moves greater than 5% over the last year. But moves this big are rare even for Figs and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was about a month ago when the stock dropped 29.5% on the news that the company reported weak third-quarter earnings. Its EBITDA missed, and its EPS fell short of Wall Street's estimates. Sales declined slightly by 1.5% year-over-year. This decrease was primarily due to lower average order values. 

On the other hand, orders from existing customers increased. Profitability took a hit as adjusted EBITDA margin dropped significantly to 3.4% from 17.2% last year, impacted by higher marketing costs and fulfillment center expenses. Given the weak results, FIGS lowered its full-year revenue growth and EBITDA margin guidance, which is always a worrisome sign. Overall, this quarter could have been better.

Figs is down 11.6% since the beginning of the year, and at $5.92 per share, it is trading 25.5% below its 52-week high of $7.94 from December 2023. Investors who bought $1,000 worth of Figs’s shares at the IPO in May 2021 would now be looking at an investment worth $196.97.

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