American Apparel's share price has continued to rise sharply after the clothing firm's board voted to oust controversial founder and chief executive Dov Charney.
Late on Wednesday, the board said it had terminated Mr Charney "for cause".
However, it declined to reveal the results of an investigation into alleged misconduct.
The firm - known for its provocative advertising and "made in America" ethos - has struggled recently.
End Quote Allan Mayer Co-chairman, American ApparelDov Charney created American Apparel, but the company has grown much larger than any one individual"
Shares in American Apparel rose more than 20% in the wake of the announcement. But in recent months, investors have been shedding their holdings of the stock, sending it down over 40% for the year.
At $0.68 (£0.40) per share, the firm's value has declined from 2008, when it could command more than $14 per share.
The company recently reported a loss of $5.5m for the first three months of this year and said sales at its stores had fallen 7%.
'Fight like hell'Mr Charney - a Canadian by birth - founded American Apparel in 1998 with a $10,000 loan from his father.
The firm rose to prominence in the mid-2000s for its "hipster chic" apparel, as well as for its explicit advertising, which some critics alleged bordered on pornography.
However, a series of lawsuits by former employees, alleging sexual harassment and racial bias against Mr Charney, have hurt the firm.
"Dov Charney created American Apparel, but the company has grown much larger than any one individual," said newly appointed co-chairman Allan Mayer in a statement on Wednesday.
However, removing Mr Charney has come with a cost.
According to the terms of its loan agreements, American Apparel "may have been deemed to have triggered an event of default", said the board, while adding that it was working with its creditors to figure out a solution.
Mr Charney is still the firm's largest shareholder, with an ownership stake of about 27%, and reports quoting an unnamed source said he planned to "fight like hell" to keep control of the firm.
At the end of May, American Apparel had about 10,000 employees and 249 retail stores in 20 countries.
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