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Some shareholders are rebelling against the aptly named British cosmetics maker Revolution Beauty. Its board resisted a majority shareholder vote led by Boohoo – its largest shareholder – to install three new lead directors. Neither company is coming out of this debacle looking pretty.
We understand why the fast fashion group Boohoo cried foul. Boohoo, which bought more than 26% of Revolution late last year, won a shareholder vote to oust chairman Derek Zissman, chief executive Bob Halt and chief financial officer Elizabeth Lake.
An attempt by the board to adjourn the annual meeting was blocked. A remaining director bypassed Boohoo’s motion and rejoined the ousted trio. As a concession to Boohoo, a special meeting in August will again vote on new directors.
Revolution Beauty already had flaws comparable to those of Boohoo, whose suppliers have been accused of mistreating employees. Trading in shares was suspended in September after Revolution’s auditors reported irregularities. Co-founders Adam Minto and Tom Allsworth, owners of more than 31%, made personal loans to distributors without the knowledge of the board. Trading did not resume until Wednesday.
The minority shareholders of the two groups should rise up. The two publicly traded stocks have lost more than 80% in two years.
The question is whether the remaining investors trust the current board or prefer Boohoo’s picks. These might seem like a way for Boohoo to control the company without a formal takeover offer.
Boohoo bought most of its stake as stock trading was suspended. The fashion retailer – keen to get into beauty products – denies takeover plans. Whether Boohoo can afford to buy an £80m cosmetics maker is moot. He wants to expand in the United States and is expected to lose money until 2025,
Aim has a bad reputation for dodgy maneuvers in boardrooms. The insurrection of the Revolution adds another case to the list. Regulators should take a closer look to verify that the rights of minority investors have not been violated.
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