Shares of Camping World Holdings (CWH -0.91%) gained 9.78% on Friday after a major shareholder increased its stake, reversing the negative momentum surrounding the RV retailer in the days since a shareholder lawsuit was filed against the company's celebrity CEO.
Abrams Capital Management disclosed in a Securities and Exchange Commission filing that it had purchased 413,446 shares of Camping World at an average price of $13.44 apiece, for a total consideration of $5.6 million. Abrams was already one of Camping World's largest shareholders, owning more than 3.8 million shares, or 10.37%, as of Dec. 30, 2018.
Abrams' latest purchase came after Camping World shares fell by nearly 13% midday on April 18 following a lawsuit accusing company chairman and CEO Marcus Lemonis, a private-equity veteran who's perhaps best known as host of CNBC's The Profit, of market manipulation. The suit, which was filed by the Lincolnshire (Ill.) Police Pension fund, alleges that Lemonis and associates used a series of public offerings to cash out of Camping World without relinquishing control and despite knowing that Camping World was "in no way ready to be a public company."
The lawsuit alleges that Lemonis and his associates made more than $530 million selling shares that they knew were artificially inflated in value. The suit says that last year, as news came out about what the lawsuit calls Camping World's "inadequate controls and true financial health," the shares lost about 60% of their value.
The market seemingly read the stock purchase as a vote of confidence from a major shareholder, easing investor concerns about holding the stock. It's up to the courts to determine the merits of the complaint, but by buying into the downturn, Abrams is expressing confidence that no matter what happens with Lemonis, the company will survive.
Camping World has struggled of late, with its shares down more than 65% since the beginning of 2018, but the company has embarked on a restructuring plan aimed at reducing inventory levels and bringing down capital expenditures. Based on the available evidence, Abrams sees brighter days ahead.