Why billionaire Ken Griffin is backing the Boohoo recovery plan

Citadel raises stake to 8.9% as embattled fast fashion retailer rethinks bonus plan

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’. [JC]

Darktrace calls in EY as it mounts fight against big fraud claims

Cybersecurity company hopes independent review will end speculation over its books

Cybersecurity firm Darktrace (DARK) has called in independent audit firm EY in response to stinging criticism of the business and its financials by short seller Quintessential Capital Management in late January.

Darktrace saw its share price fall nearly 20% in the immediate aftermath of QCM’s report, which alleges financial mismanagement and fraud, yet the stock has recovered quickly. During February to date, Darktrace stock has rallied more than 30% to 275p.

‘Appointing an independent to review financial processes after such allegations is very unusual, and we struggle to remember a recent example like this in the tech segment of the LSE,’ said Tom Kennedy, analyst at research firm Megabuyte.

An award-winning artificial intelligence-led pioneer in the fastgrowing cybersecurity industry, Darktrace has endured an erratic time on London’s stock markets since listing its shares at 250p in April 2021.

Arts and crafts consumer platform Etsy (ETSY:NASDAQ) has also come under a short selling attack, accused of being ‘one of the largest counterfeiting platforms in the world.’

The allegations were made by Citron Research, which has previously targeted GameStop (GME:NYSE) in a shorting attack, where it hopes to profit from falls in target share prices. Citron was one of several short sellers that triggered the ‘meme’ stock craze two years ago. [SF]