Fast-fashion giant Boohoo has been hit with an investor lawsuit in the UK after reports alleging its suppliers were mistreating workers caused its share price to plummet in 2020.
A report by The Sunday Times in 2020 revealed multiple alleged labour rights violations at its suppliers’ factories in Leicester, highlighting that some workers were paid as little as £3.50 an hour.
The firm’s share price tanked after the expose was published, wiping more than £1.5bn off the online retailer’s market value.
City A.M. can now reveal that law firm Fox Williams filed a lawsuit against Boohoo Group on behalf of a group of 49 institutional investors last month.
The claim argues investors who purchased shares in the years leading up to 2020 report suffered huge losses as a result of the share price drop.
The investors allege that Boohoo made untrue or misleading statements and failed to disclose or delayed the disclosure of material about the matter to the market, breaching its obligations under the Financial Services and Markets Act 2000.
Law firm Fox Williams said it was seeking to recover damages, plus interest and costs, for the investors, but did not give an amount.
“Boohoo is a prominent example of a company that failed to live up to its environmental, social and governance (ESG) responsibilities and caused significant harm to investors. We believe that our clients have a strong case for compensation,” Andrew Hill, a partner at Fox Williams, told City A.M.
“This is a landmark case that will test the legal framework for securities litigation in the UK and the role of ESG factors in corporate governance and disclosure,” he added.
According to the High Court claim’s system, Boohoo has instructed UK-Australian law firm Herbert Smith Freehills.
A spokesperson for Boohoo Group told City A.M.: “We have been made aware of a claim that is being brought by certain shareholders. The company strongly contests the allegations and will vigorously defend any claim.”
News of the claim comes after shareholders reacted furiously to the company’s decision to hand top bosses £1m in bonuses, despite the company reporting a £160m loss.