The online fashion specialist Boohoo is being sued by a group of investors for more than £100m after 2020 reports that its suppliers in Leicester mistreated workers led to a drop in its share price.
The value of Boohoo dropped by more than 50% over a period of several days. wiped out more than £1.5bn pounds sterling from its valuation. This was after a report in the 2020 Sunday Times on labour rights violations in the factories that the group’s supplier’s operate in Leicester.
Alison Levitt, QC conducted a damning report on behalf of fast fashion retailer. The report found that the initial denials of allegations of poor work practices in the supply chain were “substantially accurate”.
Fox Williams, on behalf of 49 investors, including the California State Teachers’ Retirement System (with investment assets of $332.5bn), filed a legal claim against Boohoo Group in late November. The company was accused of making untrue and misleading statements and failing to disclose material information to the market or delaying the disclosure.
Boohoo could be on the hook for millions more pounds in legal fees and interest.
The investors’ legal filing, which was revealed first by city AM, claim that those who purchased shares before the 2020 report experienced huge losses due to the drop in share prices when Boohoo’s supply chain problems were discovered.
The company claims that the share price of Boohoo has dropped further due to further exposés about conditions in supplier’s factories, such as a BBC Panorama program screened in November, last year.
Andrew Hill, a Fox Williams partner who led previous shareholder claims against Tesco, which were settled outside of court, said that Boohoo had been aware of the issues for a long time, and failed to meet past promises of fair product production.
“Boohoo stands out as a company which failed to meet its environmental, governance and social responsibilities (ESG), and has caused serious harm to investors. Our clients are entitled to compensation.
This is a landmark litigation that will test the UK legal framework for securities litigation and the role ESG factors play in corporate governance.
Boohoo’s spokesperson said: “We were made aware of an allegation that was being brought forward by certain shareholders.” The company vigorously contests these allegations and will vigorously fight any claim.
Boohoo, according to the UK-Australian firm Herbert Smith Freehills’ high court claims system has been instructed.
This claim was made after Boohoo abandoned a scheme whereby its top three bosses received bonuses of £1m despite reporting a loss of £160m.
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