One of Boohoo's largest shareholders is getting rid of stock in the fashion firm after saying that the company had failed to address concerns about working conditions at a supplier in Leicester.
Standard Life Aberdeen (SLA) criticised Boohoo's response to exploitation claims as "inadequate in scope, timeliness and gravity".
Boohoo launched an urgent investigation into its supply chain this week, saying conditions at the Leicester warehouse were “totally unacceptable and fall woefully short of any standards acceptable in any workplace”.
The company added that it was trying to identify the company at the centre of the allegations.
A Sunday Times report claimed workers at a factory in Leicester - currently in local lockdown following a spike in Covid-19 cases - were paid just £3.50 an hour, while being offered no protection from coronavirus. It was making clothes for Boohoo's Nasty Gal brand.
Lesley Duncan, deputy head of UK equities at Aberdeen Standard Investments, SLA's fund management arm, said it had invested in Boohoo since its flotation in 2014.
SLA holds a 3.3% stake in Boohoo.
Ms Duncan said it had lobbied the company over a number of years on issues such as supply chain transparency.
Next, Asos and Zalando all announced on Tuesday that they had stopped selling Boohoo clothes on their websites.
In less than 15 years, Boohoo has gone from a three-employee operation to a business with sales of £1.2bn and a 5,000 employees. Despite a drop in its share price this week, the company is still worth £3.5bn.
It all began with a market stall in Manchester. Abdullah Kamani, Mahmud’s father, supported himself by selling handbags after escaping war-torn Kenya in the 1960s to build a new life in the UK.
Abdullah went on to found a wholesale textile business, sourcing and selling garments, mainly from India, and becoming a major supplier for high-street names including New Look and Primark. His son Mahmud started working on the stall and grew up in the wholesale business, Pinstripe, delivering goods in a van for his father.
Unlike its rival Asos, Boohoo sells only its own clothing, which gives it more control over profit margins and product.
Despite a series of reports raising concerns about conditions in Leicester, starting with an Ethical Trading Initiative report in 2015, which found garment workers were being paid as little as £3 an hour, Boohoo has become the predominant retail group dealing with suppliers in the city.
In May, Boohoo raised £200m to buy up brands, and has already snapped up Oasis and Warehouse. The retail chain now includes Karen Millen and Coast, which it bought in August last year, as well as Nasty Gal and Miss Pap.