Clinton Group, a shareholder of beleaguered business The Wet Seal, has written to the firm's board seeking clarification on its liquidity and suggesting options to shore up its balance sheet.

In a letter dated yesterday (19 November), senior portfolio manager Joseph De Perio, said he was confident the company was executing the early stages of its turnaround. He said he was hopeful the board was "exhaustively running down the myriad options" available to it to shore up its balance sheet and position itself for the future

"We acknowledge the swift efforts of returning CEO, Ed Thomas to reduce headcount, take steps to right-size the expense structure, assess the e-commerce strategy and assist in the merchant efforts."

However, he added: "Despite the tectonic shift in leadership, the stock is down over 80% since the beginning of his tenure, a move we did not anticipate was in the realm of possibility when we suggested his name to the board in August.

"We acknowledge it is indeed "tough out there" in the marketplace and macro factors are headwinds. We also believe there is significant confusion in the marketplace today regarding the equity commitment and planned rights offering announced in early September. Shareholders like us are wondering what to make of the company's liquidity needs and what the pro forma capital structure will be."

De Perio said clarification on the board's intent and expected process set forth to the marketplace would go a long way to "stemming the tide of uncertainty" that appears to be reflected in the current stock price.

"The stock price action would imply a time of crisis and, as such, we would like to outline the options we believe are available to the company today to avoid any such crisis," he noted.

De Perio suggested debt financing, equity financing, retail estate concessions, or a strategic transaction.

He added: "In addition to the strategic measures outlined, we are aware of the potential value of the company's net operating loss position (NOLs). We would urge the board to take steps to preserve the inherent value in the NOL.

"Our hope is that all of these work streams are happening behind the scenes, and that this letter simply reiterates ongoing exhaustive efforts. Communication to shareholders has been deficient, and our hope is that this is remedied in the near future. We also look forward to the timely completion of our recent books and records demand to examine the company's shareholder list," he finished.

The Wet Seal could not be reached for comment at the time of going to press.