Boohoo shares back on the rise after £15m founder investment

By

Sandra Halliday

Published
Jul 17, 2020

Boohoo shares have been on a rollercoaster ride in recent weeks due to the Leicester garment factory scandal, but they rose again on Thursday after its founders bought £15 million worth of shares.

That level of demand and the confidence signal it sent out helped push the price 12% higher, but on Friday morning the shares fell again, dropping around 5% as the markets opened.

But while the big focus is on the fact that the shares, at one point in recent weeks, were trading at less than half of the high point from earlier in the year, they’re currently at a similar level to where they were this time last year (230p each). So this level of share price isn't an unknown quantity for the company. 

Yet following the 2019 low point, they had generally been on an upward trajectory (aside from the market crash in March) as the company continued to deliver super-strong results both before the pandemic and while it was raging.

This suggests that the company’s shares could continue to be volatile until it delivers its next set of results and investors see that it's continuing to prosper….or not. 

It remains to be seen just how much the issues in Leicester garment factories will affect it and whether its client base of young fashion fans, who want their products to be inexpensive, on-trend, and delivered quickly, will turn away from it due to its supply chain issues.

As for the share purchase on Thursday, co-founder Mahmud Kamani spend £10.7 million on buying 5 million shares in the company while Carol Kane spent £4.3 million. Senior leaders will frequently purchase company shares as a signal to other investors that they have confidence in the business’s long-term prospects. They also clearly believe that the share price is low at the moment and that they can profit longer term from the purchases.

But there are some investors who are unlikely to buy into the company in the future. Some large institutional investors that promote their funds as ethical have already sold their Boohoo shares. An ethical fund run by DWS Invest has reportedly done so, following the lead of Aberdeen Standard Investments, which sold its stake in Boohoo when the scandal first hit. However, DWS is part of Deutsche Bank, and its parent company does have further holdings in Boohoo.

Boohoo continues to come in for heavy criticism over its use of Leicester factories that have been branded as sweatshops with politicians saying the company knew of malpractice at least a year ago, something the company has denied.