CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Short-seller assault does little to stop Boohoo shares' ascent

ShadowFall Capital went on the offensive last week, with the short seller questioning the online fashion retailer’s free cash low levels. But the assault has done little to dissuade other investor interest in Boohoo shares.

Boohoo saw its shares slip momentarily last week when short-seller ShadowFall Capital released a 53-page report that claimed the online fashion retailer misrepresented its free cashflow this year by £32 billion.

The report precipitated Boohoo shares to fall 12% in a single session, but the slide was only temporary, with investors remaining optimistic about the stock, helping the company’s share price rally 20% in the days since the short-sellers accusations.

In response, Boohoo said that it ‘strongly refutes’ the allegations made by the hedge fund and that it intends to use the proceeds from its recent £200 million capital raise to explore further M&A opportunities following the market disruption caused across the retail sector due to Covid-19.

Liberum raises share price outlook on Boohoo

Analysts at Liberum certainly remain optimistic about Boohoo and its share price trajectory, with the London-headquartered investment bank upping its target price for the stock at the end of May.

Liberum raised its target price for the online fashion retailer from 430p to 490p per share, with analysts blaming their positive outlook for the stock on its recent acquisition of the remaining 34% stake in PrettyLittleThing, labelling it’s a ‘very shrewd and positive move’.

Liberum estimates that the deal values PrettyLittleThing between £998 million and £1.2 billion, which its analyst said implies a £12 million forward 12x - 15x enterprise value (EV)-to-EBITDA ratio, which is approximately half of the respective current multiples for Boohoo.

‘We forecast £215 million of free cashflow over the next two years, leading to net cash of £476 million by year-end 2022, excluding further M&A,’ Liberum said.

‘This gives significant firepower to continue developing the group's stable of own brands, broadening its customer base and opportunity set across the global fashion market,’ it added.

How much does it cost to buy UK shares with IG?

There are two ways to ‘buy’ UK shares with IG: trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).

Remember, CFDs are derivatives, which come with higher risk and reward than investing.

Cost to get exposure to Lloyds stock

CFD trading Share trading
Action Buy 16,000 share CFDs Buy 16,000 shares
Capital required to open £2000 £10,000
Total fees £20.88 £16

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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