Investors hope for stability after a busy few months for Boohoo
Investors will hope that the company, involved in a controversial buyout and hit by a short-seller’s report, can exert an aura of calm in its trading update on Wednesday.
In March, just before the UK economy shut down, nervous shareholders sent Boohoo’s shares tumbling to only a little over half the value of where they were trading in February.
But investors that stuck with the company, or bought in at a low of 157.5p were rewarded soon after lockdown, as the firm roseback up to 390p per share.
“Boohoo has had its share of ups and downs over the past few years, and this year’s share price moves haven’t been any different. The online retailer saw record highs in the share price in January before a spectacular Covid-19 collapse to three-year lows, which was then followed by a recovery to new record highs last month,” said CMC Markets chief market analyst Michael Hewson.
In May, the company was forced to defend itself from the claims of a short-selling hedge fund. ShadowFall accused bosses at the retailer of misleading shareholders over its financials. Boohoo denied this.
It also warned that the £200m the firm had raised could be used to buy the stake of Pretty Little Thing that Boohoo did not own from the Umar Kamani, the son of Boohoo’s founder.
Just days after the report, Boohoo paid £270m for Mr Kamani’s third of Pretty Little Thing, far below ShadowFall’s claims that it could cost up to £1bn.
Mr Hewson said: “The short-seller also claimed that the company was treating cash generated by PLT as though it owned the business outright, saying it could cost the company almost £1bn to buy the remaining stake. The resultant buying out of the said stake by Boohoo management helped put paid to that claim.”