XELB & United Trademark Group (UTG)

UTG enters strategic partnership and investment in XELB

Last week, on April 24, Xcel Brands (XELB 0.00%↑) and United Trademark Group (UTG) jointly announced UTG’s strategic partnership and $9M investment in XELB. According to the press release: “UTG specializes in mergers, acquisitions, brand strategy, and digital innovation; partnering with top-tier companies worldwide to maximize brand value and unlock new growth opportunities. They empower brands and merchants by providing the infrastructure and operational expertise—across design, manufacturing, distribution, and retail.” I have since learned that UTG’s biggest brand is Jeep in the China market. Prior to this, I had no idea that Jeep was popular in China—but UTG apparently has over 1,000 retail stores there!

In terms of the $9M investment in XELB by UTG, the transaction results in XELB restructuring its debt in much more favorable terms, which I will discuss in more detail below. In addition to that, the Form 8-K filed by XELB reveals that UTG may invest additional cash in XELB over a 7-year period through currently out-of-the money stock warrants. These warrants are in multiple tranches, as indicated here:

131,100 shares at $6.60 per share

195,271 shares at $7.50 per share

195,271 shares at $10.00 per share

195,271 shares at $12.50 per share

195,271 shares at $15.00 per share

195,271 shares at $17.50 per share

Below, I will dive into some of the more specifics of this deal and what it means for XELB and its shareholders.