Revolution Beauty has received a pre-action letter from a former investor seeking potential claims against the group.
The cosmetics group, which had its shares suspended in 2022 as a probe found the firm had falsely inflated sales figures, told investors on Friday the potential claims relate to shares once owned by investment trust Chrysalis Investments.
It marks the latest stage of shareholder disputes in Revolution Beauty’s short but tumultuous life as a listed company.
Revolution Beauty said it contests the allegations brought by Chrysalis, which bought the shares in July 2021 and sold them in late 2022 after a 90 per cent slump in their value.
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Chrysalis listed in 2018 with a portfolio of unquoted companies looking to grow and go public. A post-pandemic slump in the value of growth stocks of this kind has hammered the closed-ended fund’s fortunes.
Currently trading at an eye-watering 43.57 per cent discount to net asset value, Chrysalis shares are down roughly 59 per cent over the last three years.
Revolution Beauty shares were down by around 95.15 per cent between the end of July 2021 and December 2022 at a low of 8.25p.
The shares listed in July 2021 at 170p, and Chrysalis ended up taking home just £5.7million out of a £45million initial investment.
Chrysalis, which declined to comment further on the pre-action letter, told investors in financial results published on Monday that the Revolution Beauty shares had been bought ‘on the basis [of] information’ that later turned out to contain ‘misstatements and material omissions’.
It added: ‘The Company wrote a formal letter of claim to Revolution Beauty on 22 November 2023, which requested a response within 28 days.
‘A response has recently been received asking for a further 28 days to provide a response. The Company is now considering next steps with its retained lawyers, Travers Smith.’
AIM-listed Revolution Beauty has endured a volatile existence as a listed business, most recently culminating in the completion of a Boohoo-led boardroom coup.
Boohoo, Revolution Beauty’s majority shareholder, led investor action that ultimately drove the departure of chief legal officer Elizabeth Lake, chairman Derek Zissman and chief executive Bob Holt.
Former Walgreens exec Lauren Brindley was brought in as the new boss, with Boohoo deputy Alistair McGeorge becoming non-executive chair.
But Revolution Beauty swung to a profit last year, thanks to revenues from Boots and Superdrug stores.
In November, it emerged the group was nearing a settlement with its founder Adam Minto, who is in advanced talks to repay nearly £3million over allegations that he breached his fiduciary duties to the company.
A probe found serious issues with the running of the business under previous management.
This included loans from Minto and Allsworth, founder of Medichem – which was acquired by Revolution Beauty in 2021 – to an employee and some distributors.
None of these loans, worth around £1million in total, had been disclosed to the board.
Revolution Beauty shares were down 0.7 per cent to 29.8p in early trading.
