Global hedge fund Armistice Capital made headlines when it sold its holdings in Lululemon Athletica Inc. (NASDAQ: LULU). Sources reported the investment firm lessened its holdings by 88.5% in the fourth quarter of 2022. The estimated number of shares sold was 231,475, leaving Armistice Capital with just 30,000 shares, worth $9,611,000 at the time. The shares were worth about $11,742,600 at the beginning of the third quarter of 2023.
Headquartered in New York, Armistice Capital invests mostly in equities. The company selects unique, concentrated bets to generate uncorrelated returns. To mitigate basis and market risks, the company maintains significant position and portfolio-level hedges. Armistice Capital was founded by Steven Boyd, its chief investment officer, in 2012.
Prior to founding Armistice Capital, Boyd was a senior research analyst at Senator Investment Group before its launch in February 2008. Before moving to Senator Investment Group, Boyd worked as an associate at York Capital, where he mainly focused on health care and consumer equities. Boyd is no stranger to long-short equity hedge funds — before he also worked at York, he worked as an analyst at SAB Capital Management, a value-oriented long-short equity hedge fund. Boyd combines his economics and political science degrees to make value-oriented, event-driven decisions.
Lululemon Athletica’s Stock and Stability
Founded in 1998 by Dennis James Wilson, Lululemon Athletica Inc. is a Vancouver, Canada-based company specializing in designing and retailing quality and functional technical athletic apparel, footwear, and accessories. The company is now a global brand known for technical athletic gear.
Still, according to financial media concern beststocks.com, investors seemed to be lukewarm on Lululemon’s stock performance at the end of 2022. Since Armistice Capital is a value-oriented and event-driven hedge fund that focuses on the health care and consumer sectors, it made sense to sell the stock. At the time, it had a market capitalization valuation that exceeded $46 billion.
At the time of the stock sale, financial analysts suggested that the company’s long-term stability and growth potential were in danger because the price/earnings-to-growth ratio was a bit higher than the price-to-earnings ratio, among other reasons, including relatively high valuations compared to earnings growth forecasts. Although many factors figured into the decision to sell, Armistice Capital still kept a small portion of the stock. The instability did cause the stock to drop significantly during the first quarter of 2023, but it has since gained back nearly all of its value.