Leading hedge funds target Asos and Boohoo, betting on their demise in the wake of Competition and Markets Authority greenwashing investigation
- CMA investigates whether Boohoo and Asos sustainability claims are misleading
- Short sellers increase the chance that fashion retailers’ share prices will fall further
- CMA chief Sarah Cardell warns it will file a claim in court if it finds evidence
Stock flop: Boohoo sells Karen Millen
Leading hedge funds have targeted fast-fashion retailers Asos and Boohoo, betting their demise in the wake of a greenwashing investigation by the Competition and Markets Authority (CMA).
The CMA is investigating whether some of Boohoo and Asos’ sustainability claims may be misleading to consumers. The agency’s chief executive, Sarah Cardell, warned it will file a claim in court if it finds evidence of wrongdoing.
Since the announcement on July 29, shortsellers have pushed up their bets that Boohoo and Asos stock prices will fall further. Both stocks are down about three-quarters from a year ago, but hedge funds predict worse to come.
Well-known hedge funds such as Marble Bar Asset Management increased its ante against Asos by 0.12 percent each last week, while GLG increased its stake by 0.03 percent. Asos is feeling the heat, with a total of 5.98 percent of its shares short.
Marble Bar was founded by mega-wealthy Australian Hilton Nathanson, once listed as one of Britain’s 25 richest hedge fund managers.
The financial magnate has some political clout – he was allowed to leave the hotel quarantine in Perth after just three days to attend his father’s funeral last August, at a time when Australians were living under strict Covid restrictions.
GLG, one of the original hedge funds from the 1990s, has since been acquired by British investment manager Man Group, which has around £29 billion ($35.2 billion) in assets under management.
Boohoo also looks increasingly vulnerable with 7.27 percent of its shares on loan. CapeView Capital and AHL Partners both increased their stakes against Boohoo on August 1, 0.16 percent and 0.04 percent, respectively.
Danni Hewson, financial analyst at AJ Bell, said: “If it turns out that either or both have misled consumers and that results in a fine, then I think the reputational damage will have an impact on the stock price. It feels like [Asos and Boohoo] have dealt with people quickly… They can’t afford to lose customers because they are already having a hard time.’
Greenwashing is not going well because more and more investors are putting sustainability at the heart of their decisions, says Mark van Baal, founder of Follow This, a club of activist shareholders. He said: “Governments that think looking sustainable is enough will face aberrant and repulsive shareholders who can hurt their share price.”
Boohoo’s second-largest shareholder, T. Rowe Price, halved its stake in the struggling retailer from 9.7 percent to just under 5 percent on Aug. 2.