N.Y. Investment Firm Buys 12% Share of Irvine’s Wet Seal

A New York-based investment firm has paid $11.17 million to acquire 1.56 million shares of Wet Seal Inc. stock, the Irvine-based retail chain operator said Wednesday.

Craig Drill Capital L.P. has bought 23% of Wet Seal’s Class A shares, giving it a 12% overall stake in Wet Seal, the company said.

Craig Drill Capital acquired its stake over a period of several weeks, according to Securities and Exchange Commission filings, but it was unclear Wednesday if the new shareholder would remain a passive investor or seek an active role at Wet Seal, which operates more than 350 stores in 34 states.

Craig Drill executives did not return telephone calls Wednesday. Wet Seal Vice President Ann Kim said that the New York firm acquired the bulk of its stock in a January transaction involving Toronto-based Dylex, a major Wet Seal shareholder.

Dylex earlier said it had sold 1.1 million shares to generate $7.5 million in cash to help reduce its debt load. Dylex, which operates several specialty store chains in Canada, still owns 1 million Wet Seal shares.

Wet Seal, which closed up 75 cents at $8 on Wednesday in Nasdaq trading, has received favorable reviews in recent weeks from observers who view the chain as ready to benefit from an anticipated retail sector upswing.

Margaret Gilliam, a New York-based retail industry analyst with CS First Boston recently issued a “buy” recommendation for Wet Seal, adding that the company should soon enjoy “snazzy” earnings.