Stock flop: Boohoo sells Karen Millen
Leading hedge funds have targeted fast-fashion retailers Asos and Boohoo, betting on their demise in the wake of a greenwashing investigation by the Competition and Markets Authority (CMA).
The CMA is probing whether some of Boohoo and Asos’s sustainability claims are potentially misleading to consumers. The agency’s chief executive, Sarah Cardell, warned that it will pursue a claim in court if it finds evidence of wrongdoing.
Since the announcement on July 29, short sellers have boosted their bets that Boohoo and Asos’s share prices will drop further. Both stocks have plummeted by around three-quarters from a year ago, but hedge funds predict worse to come.
Well-known hedge funds such as Marble Bar Asset Management upped the ante against Asos last week by 0.12 per cent each, while GLG raised its bet by 0.03 per cent. Asos is feeling the heat, with 5.98 per cent of its shares being shorted in total.
Marble Bar was founded by mega-rich Australian Hilton Nathanson, once named as one of Britain’s 25 wealthiest hedge fund managers.
The finance magnate has some political influence – he was granted permission to leave hotel quarantine in Perth after just three days to attend his father’s funeral in August last year, at a time when Australians were living under strict Covid restrictions.
GLG, one of the original hedge funds of the noughties, has since been snapped up by UK investment manager Man Group, which has around £29billion ($35.2billion) of assets under management.
Boohoo is also looking increasingly vulnerable with 7.27 per cent of its shares out on loan. CapeView Capital and AHL Partners both raised their bets against Boohoo on August 1 by 0.16 per cent and 0.04 per cent respectively.
Danni Hewson, financial analyst at AJ Bell, said: ‘If either or both are found to have misled the consumer and that results in a fine, I think the reputational damage would impact the share price. It feels like [Asos and Boohoo] have pulled a fast one on people… They can’t afford to lose customers as they are already struggling.’
Greenwashing doesn’t go down well as more and more investors put sustainability at the heart of their decisions, said Mark van Baal, founder of Follow This, a club of activist shareholders. He said: ‘Boards that think that looking sustainable is enough will be confronted by dissenting and divesting shareholders which could hurt their share price.’
Boohoo’s second largest shareholder, T. Rowe Price, halved its holding in the struggling retailer from 9.7 per cent to just under 5 per cent on August 2.