US-based hedge fund Citadel has upped its stake in Boohoo (BOO:AIM) from 5.3% to 8.9% in a show of confidence in
the online fashion retailer’s turnaround potential. Citadel is majority-owned by billionaire founder and CEO Ken Griffin, so the stake-building demonstrates smart money still sees value in
the PrettyLittleThing, Dorothy Perkins and Debenhams owner.

Citadel’s buying took place right before Boohoo unveiled less demanding bonus targets (16 February) in the wake of the ‘unique and unprecedented set of macro-economic and market headwinds experienced over the last three years’ that have seen its share price plunge from north of 400p in 2020 to 53p following profit warnings and sustainability concerns.

Boohoo explained there was now ‘little or no value’ in the existing Growth Share Plan or Management Incentive Plan after its market capitalisation ‘significantly decreased’. Its new growth plan encompasses five tranches of share price hurdles, from 95p to 395p, to create shareholder value within five years and grow the market cap to £5 billion. If vested, the plan has the potential to result in a maximum dilution of around 6% for existing shareholders, with awards potentially worth up to £175 million.

Shore Capital warned it remains to be seen ‘whether the plan can help Boohoo overcome intense competition and cash issues and achieve its ambitious goals’. In the broker’s view, entrepreneurial executive chairman Mahmud Kamani’s involvement is ‘central to the company’s recovery efforts’.

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