Xcel Brands Stock Soars 66% on Isaac Mizrahi Brand Settlement
Company transfers equity stake in a strategic deal for future capital rights, resolving outstanding brand disputes and boosting investor confidence.
Shares of Xcel Brands (NASDAQ: XELB) skyrocketed in after-hours trading, jumping more than 66% to $2.88 after the company announced a significant settlement agreement. The deal resolves disputes related to its stake in the iconic Isaac Mizrahi brand, which is controlled by affiliates of the brand management firm WHP Global.
The agreement, , fundamentally reshapes Xcel's relationship with the brand. Under the terms, Xcel Brands transferred its entire 17.5% equity interest in IM Topco, the holding company for the Isaac Mizrahi brand, to an affiliate of WHP Global.
In exchange for its equity, Xcel Brands secured a Capital Appreciation Right (CAR). This strategic instrument entitles the company to 15% of the net proceeds from any future qualifying sale of IM Topco, but only after the consideration exceeds a $46 million threshold. This arrangement, valid through September 2032, allows Xcel to exit its direct ownership position while retaining significant upside potential from the brand's future growth and potential sale.
Investors reacted with strong optimism to the news, sending the stock soaring in a move that signals approval of the deal's structure. A key benefit for Xcel is its release from any future liability under a previous License Termination Agreement, a move that de-risks its balance sheet and removes a potential financial overhang. The reflects the market's positive reception to this newfound clarity and financial flexibility.
As part of the , key Xcel executives will continue to provide services to the Isaac Mizrahi brand through the end of 2025, ensuring a stable transition. This settlement allows Xcel's management to focus on its core brand portfolio while maintaining a vested interest in the long-term success of one of fashion's most recognized names.