Is there something in Boohoo Group PLC (AIM:BOO) that the market is missing?
Two US hedge funds have each acquired roughly 5% of the retailer in the space of two weeks, which is not bad given the recently uninspiring trading updates from the group.
It’s not just Boohoo, of course, as in recent weeks the retailers have formed a procession of profit warnings, amidst the cost-of-living crisis.
Against this backdrop, the apparent stake-building by Camelot and Citadel raised eyebrows.
Bargain-hunting would be a simple explanation, given that Boohoo shares had previously nosedived - down some 81% in the past year.
They’re not casual purchases however, so the timing perhaps suggests Camelot and Citadel see something in Boohoo that other everyday investors have yet to see.
Who are the investors?
Camelot Capital Partners acquired a 4.59% stake in BooHoo roughly two weeks ago.
California-based Camelot was founded in 2015, and presently has close to US$1bn under management.
Citadel, led by Ken Griffin (whose name may sound familiar, as he was recently one of the potential suitors for Chelsea FC) is a much larger investment group, with some £43bn in assets. Among its notable holdings are Amazon, Tesla, and Costco (NASDAQ:NA:COST).
Maybe more divisive?
Bargain hunting aside, more divisive motivations may be afoot – according to Julie Palmer, a partner at restructuring specialist Begbies Traynor (AIM:BEG).
“It could be a recognition that actually the price has fallen so much that it is at, or near the bottom, and that these hedge funds are looking to cash in on any bounce in the price.”
“On a more sinister level, it could be taking a position in case they’re going to move through a restructuring of some sort and get a position or some control over how [Boohoo’s] debt gets dealt with.”
“Usually if a hedge fund commissioned officer can make some money on their investment then they will look at doing so.”
So far, investors in London appear happy to take the news at a positive face value, with the share up around 2%, helped by a general boost to sentiments around the City on Thursday as equity markets enjoyed some breathing room.
It remains to be seen what these new investors have in store for Boohoo, though hedge funds tend not to be the most passive bunch, so it likely looks like one to watch in the coming weeks and months.