Share price has rocketed up this morning!
Bad luck short sellers
Hey, I bought some shares of Boohoo because my hypothesis was that the company that executed well and whose brands were loved by their customers. So I believed they would rebound to a strong position when the Covid crisis was over.
What I’m trying to understand is why it has had sudden jump in its stock price over the past 7 days.
Does anyone know if any knew information came to light
TL;DR: A worker leaked that Boohoo had a cool 230% growth in processed orders.
Boohoo’s stock price. grew 45% in the past few days.
I don’t want to avail of the overused word “unprecedented”, but it’s quite the rally!
First of all, equities have been on their way up in the past few days. The S&P 500 gained 1.5% today, making this its best week since 1974. (source)
That always helps.
For Boohoo specifically, e-commerce is booming right now.
Anecdotally, I hear from friends selling online that their sales are way up. I reckon it’s because people are literally twiddling thumbs at home and there is not that much diversity in entertainment (Tiger King, I know).
There was a bit of news underscoring this on 7 April.
Basically, the Guardian accused Boohoo and ASOS that they don’t enable social distancing and hence putting their workers at risk. One worker shared a data point:
So that’s the bit of news you might be looking for.
But as we learnt from Jeff Bezos, these results have been made quarters ago. Boohoo’s business is well-managed - its supply chain is diverse with 40% in the UK, and it invested £32m on automation at one of its two distribution centres.
For its recently completed financial year, an enterprise value (market cap minus net cash) of about 1.6 x sales is expected by analysts.
Make no mistake, plenty of risk here as is the case with individual shares, but it’s been a well-managed company.
Fraser’s Group has also seen a nice rebound this week with a 25% (47p) increase from a week ago
Ah yes, at least in their case I know that they did a raise so I understand that: https://www.retailgazette.co.uk/blog/2020/04/asos-raises-247m-in-share-placing-as-sales-drop-by-25/
Ahh now that’s starting to make sense.
Most people believe it’s undervalued now + the spike in demand at their warehouses = increased demand for their stock.
Thank you very much for this, I appreciate it.
oh I didn’t even know that mike Ashley had rebranded. I suppose quite a few clothing retail shops are up.
I recently read that ASOS had a lot of sales reductions. Maybe the others are doing the same? Have to do some research
This is one business that didn’t suffer from Covid! It raised £198m in a share placing earlier in May, to do mergers and acquisitions (good time to do it I think).
Now it spent £324m to take a 66% stake in Pretty Little Thing.
Yesterday the share price was down a short-seller (ShadowFall) accused Boohoo with misrepresenting its free cash flow by £32.2m (65%).
There always seems to be something going on with this stock.
Boohoo already owned 66% of PLT - the acquisition today was for the remaining 34%. Personally, I think it’s a great chess move as one of Shadowfall’s points in their report was that the longer Boohoo holds out, the more expensive the minority stake in PLT gets and due to the same family ownership, is a conflict of interest to shareholder value. Obviously doesn’t take away from Shadowfall’s argument that Boohoo had the option to buy PLT 2 years ago and they only exercised 66% of it.
boohoo (AIM: BOO), a leading online fashion group, is pleased to announce the acquisition of the remaining 34% of shares in prettylittlething.com Limited (“PLT”) from its minority shareholders (Umar Kamani and Paul Papworth) for an initial consideration of £269.8 million, potentially rising to £323.8 million. The acquisition is expected to be significantly earnings enhancing on a fully diluted basis with immediate effect.
That’s right, thanks for correcting it. I got confused, trying to read all the news about my watchlist stocks!
One of the things that repelled me about fast fashion before was the waste these companies would produce.
In the case of Boohoo, ‘green’ initiatives include
- incentivising customer recycling: it launched a sustainable second-hand range, and it keeps promoting the longevity of its clothes.
- It’s also working toward better supply chain transparency and it has offered it would allow the auditing of its Leiscester factory. Media frequently painted the place as a reshoring dystopia.
It’s a good question though if a fast fashion company can ever become sustainable.
Lawyers filed class action suits against PrettyLittleThing and Nasty Gal last week following a similar claim lodged against Boohoo last month. Total damages could exceed $100m if the claims succeed, said Almadani Law and AI Law, the firms leading them.
It would be interesting to look into Almadani Law and AI Law and this lawsuit. Why, who, why now, etc.
A successful company will be a target, the question is if that will impede its growth and how well they can fight back.
What a bargain.
- Year-on-year UK sales up 30% in the three months to 31 May, to £183m.
- Year-on-year US sales up a chunky 79% to £92m.
This one of those few businesses that Covid-19 only made stronger (Games Workshop is another one).
Those good at e-commerce thrive now. I hate that I invested in JD Sports!