Boohoo shares have experienced a turbulent period recently due to the controversy surrounding its garment factories in Leicester. However, there was a glimmer of hope on Thursday as the company’s founders, Mahmud Kamani and Carol Kane, purchased £15 million worth of shares. This significant investment not only caused the share price to rise by 12%, but also sent a strong message of confidence to investors. Unfortunately, the positive momentum was short-lived, as the share value decreased by approximately 5% on Friday morning when the markets opened.

While much attention has been focused on the fact that Boohoo shares were trading at less than half of their previous peak, it is important to note that their current value is similar to that of last year. After hitting a low point in 2019, the company’s shares had been steadily climbing, except for a setback caused by the market crash in March. This suggests that the shares may continue to experience volatility until the company releases its next set of results, which will demonstrate its ability to thrive in the current climate.

The impact of the Leicester garment factory controversy on Boohoo’s future remains uncertain. It remains to be seen whether the company’s young customer base, known for prioritizing affordability, trendiness, and quick delivery, will turn away due to concerns about its supply chain ethics. However, the purchase of shares by Kamani and Kane on Thursday serves as evidence of their belief in the company’s long-term prospects and the potential for profit from the current low share price.

However, not all investors are likely to support Boohoo going forward, especially those who prioritize ethical investments. Ethical fund managers such as DWS Invest and Aberdeen Standard Investments have already sold their Boohoo shares. It is worth noting that DWS is a subsidiary of Deutsche Bank, which still holds shares in Boohoo.

The criticism against Boohoo regarding the labeled “sweatshops” in Leicester has not subsided. Politicians claim that the company was aware of malpractice in these factories at least a year ago, an allegation that Boohoo denies. The ongoing controversy surrounding its supply chain practices may further impact the company’s reputation and financial performance.

Ultimately, the future of Boohoo shares depends on the company’s ability to consistently deliver strong financial results and address the concerns surrounding its supply chain practices. While the recent share purchase by its founders provides a positive signal to investors, the next few months will be crucial in determining the company’s long-term viability.

Links:
BBC: Boohoo founders buy £15m shares amid controversy
The Guardian: The Boohoo controversy and its impact on COVID-19