(Alliance News) - Revolution Beauty Group PLC on Friday confirmed it has received a pre-action claim from one-time shareholder Chrysalis Investments Ltd, which accused the cosmetics retailer of "negligent misstatement and/or misrepresentation".

Revolution Beauty said it "strongly contests the allegations" and has engaged with Chrysalis's advisers.

Revolution Beauty added that it has received a letter from investment firm Chrysalis, though the latter has not yet kicked off legal proceedings.

In its annual results on Monday, Chrysalis said it has "potential claims" under the UK financial services & markets act against Revolution Beauty.

Chrysalis bought into the AIM listing in July 2021, purchasing around GBP45 million worth of shares, and sold its holding in "late 2022" for roughly GBP5.7 million, so about GBP40 million off what it initially paid.

Chrysalis said: "The original share purchase was made on the basis that information provided to the company by Revolution prior to the company's purchase of the shares in Revolution, and during the period in which the shares were held prior to their sale, contained misstatements and material omissions."

Chrysalis said it wrote a formal letter to Revolution Beauty in November of last year, requesting 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," Chrysalis said.

Revolution Beauty shares resumed trading on AIM in late-June, having been suspended at the start of September 2022 as it failed to deliver its first audit in time.

The company floated in July 2021 and has had a dramatic stint on the London market since then.

In December, it announced the resolution of its legal dispute with co-founder Tom Allsworth.

Revolution Beauty has agreed to pay GBP270,000 to Allsworth regarding historical legal fees, and both parties have agreed a revised payment schedule for outstanding consideration due to Allsworth in exchange for Medichem Manufacturing Ltd. Revolution acquired the hair and skincare company from Allsworth in October 2021 for a total consideration of up to GBP27.5 million.

Revolution Beauty in December said it also continues to seek a settlement agreement with former CEO & co-founder Adam Minto. It had announced in late June that it intended to commence legal proceedings against Minto regarding his alleged breaches of fiduciary responsibilities. These contributed to the delay company's financial results for the year ended February 28, 2022, and its shares being suspended from trading.

Revolution Beauty had also been locked in a dispute with major shareholder boohoo Group PLC.

The duo reached a "settlement agreement" in July, however, that saw Bob Holt and Derek Zissman step down as Revolution Beauty chair and CEO, respectively.

The resolution followed weeks of back and forth and a dramatic annual general meeting which saw boohoo briefly get its way and oust key members of Revolution Beauty's board, only for them to be reinstated straight after.

Alistair McGeorge, Neil Catto, Rachel Horsefield and Peter Hallett joined Revolution Beauty's board. boohoo had previously attempted to jettison McGeorge, Catto and Horsefield to the Revolution Beauty board.

For Chrysalis, meanwhile, the next few weeks could prove pivotal. It recently celebrated its fifth anniversary, so it will face a continuation vote at its March 15 annual general meeting.

"The investment adviser strongly believes that the best outcome for shareholders is that they vote for continuation, such that the timing of exits can be finessed for valuation maximisation," Chrysalis said on Monday.

Revolution Beauty shares traded 2.5% lower at 29.25 pence each in London on Friday morning. Chrysalis Investments rose 0.4% to 78.50p.

By Eric Cunha, Alliance News news editor

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