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UBS Backs Boohoo At Revolution Beauty – What Next?

Tim Worstall
Tim Worstall trader
Updated 7 Sep 2022

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Key points:

  • UBS has just bought 6% of Revolution Beauty Group
  • REVB is still suspended – so, is this one leg of a trade?
  • Or is UBS backing the Boohoo idea that Revolution will recover?

We could say that UBS is being brave – in that Yes Minister sense – because they've just picked up 6% of Revolution Beauty Group (LON: REVB) presumably on the back of Boohoo‘s (LON: BOO) similar buying into the company. There's little else to recommend REVB at present after all – they're not even getting their accounts together on time, let alone doing well in the marketplace.

There is one technical issue here, which is that Revolution Beauty shares are currently suspended. As we say, they're not able to get their accounts done on time, so that shares aren't being traded. That does not mean, however, that it's not possible to buy them – only that it cannot be done through the exchange. Private bargains can still be struck. Which leads us into a nice piece of speculation over what UBS is doing here.

For UBS has just announced that they've picked up 6.3% or so of Revolution Beauty's shares. This happened yesterday, the 6th, so it's while the suspension is going on – this is not an old trade only now being reported. Which does lead to interesting speculation as to what is going on here? Is this UBS picking up the shareholding of someone getting out? Or is this a positive move by UBS concerning REVB?

Revolution Beauty share price
Revolution Beauty share price from IG

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To be fair about things Revolution is a bit of a dog as far as shares go. That's why they're suspended – it's not wholly obvious that the company is still a going concern and that's part of the delay in getting the accounts done. On the other hand Boohoo has bought into REVB in quite a big way. BOO bought 7% of REVB which boosted Revolution's share price 16% even as it dragged Boohoo's down a couple of percent. The argument made was that Boohoo has distribution agreements with Revolution, could see that the products were doing well enough and so thought it might take part in the profits from that. If, indeed, profits there are from that.

At which point one explanation for the UBS picking up 6% of REVB is obvious. UBS shares the BOO supposition that after the suspension things will be fine and the Revolution share price will rise. That is why you buy a decent stake in a company after all.

However, it's possible to think of other explanations. For example, perhaps some core shareholder in REVB wanted to get out even during the suspension? In that case selling – at some wildly low price – to a bank willing to hold the stake could be the only way to do that. But that explanation runs into the announcement problem. We should also be seeing the note telling us that someone with over 3% (the announcement limit) has reduced their shareholding to match the UBS position.

In the absence of that announcement then we should assume that UBS has picked up the stock piecemeal – and therefore as a positive move to increase the stake, not a part of some other trading business.

Given that REVB is currently suspended the only likely impact of this is upon BOO shares – their decision to buy into REVB is now being backed, in concept at least, by a major bank.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.