• Thursday, June 13, 2024

Business

Investors seek £100m from Boohoo over share price drop

The company’s shares plunged by more than 40 per cent, slashing over £1.5 billion off its value

REUTERS/Dado Ruvic/Illustration

By: Pramod Thomas

INVESTORS in Boohoo are pursuing over £100 million in compensation from the online fashion retailer following a drastic share price drop in 2020, sparked by reports of worker mistreatment at its Leicester suppliers, reported The Guardian.

The company’s shares plunged by more than 40 per cent, slashing over £1.5 billion off its value, after a Sunday Times expose revealed labour rights violations, including workers being paid as little as £3.50 an hour—far below the legal minimum wage.

An independent report by Alison Levitt QC later confirmed these allegations, prompting legal action by 49 investors, including the California State Teachers’ Retirement System, represented by Fox Williams lawyers.

The claim alleged Boohoo made misleading statements and failed to disclose material information, breaching its obligations under the Financial Services and Markets Act 2000.

The investors are seeking £100m in damages, plus legal costs and interest, citing substantial losses suffered by shareholders due to the share price drop following the supply chain scandal. Further price reduction occurred after subsequent exposés, such as the BBC Panorama report, which revealed pathetic conditions in suppliers’ factories.

Andrew Hill, a partner at Fox Williams, stressed Boohoo’s failure to uphold its promises of fair production and its disregard for environmental, social, and governance (ESG) responsibilities, posing significant harm to investors.

“This is a landmark case that will test the legal framework for securities litigation in the UK and the role of ESG factors in corporate governance and disclosure,” Hill was quoted as saying.

Boohoo, however, vehemently denied the allegations and plans to defend against the claim.

“We have been made aware of a claim that is being brought by certain shareholders. The company strongly contests the allegations and will vigorously defend any claim,” a spokesperson said.

Boohoo has engaged UK-Australian law firm Herbert Smith Freehills to handle the legal proceedings.

The claim surfaced following shareholder protests that compelled Boohoo to abandon a scheme where its three top executives received £1m in bonuses, despite the company posting a £160m loss.

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