American Apparel shares rocket after founder Dov Charney is ousted following 'misconduct investigation'

Shares rose as much as 20% in early New York trading as traders reacted to the news

American Apparel's Dov Charney speaks at the LA Fashion Awards at the Orpheum Theatre on October 21, 2005 in Los Angeles, California (GETTY IMAGES)

Shares in American Apparel rocketed in New York trading after its controversial founder and chief executive was ousted by the board citing an internal investigation into allegations of misconduct.

Shares jumped as much as 20 per cent in early trading as Wall Street reacted to the news that American Apparel's board of directors voted unanimously to remove him as CEO, insisting that the company is "larger than any one individual".

The 45-year old, who founded American Apparel in 1998, has been in charge since 2007 when the company went public, but in recent years the retailer has seen sales decline and struggled with debts. Earlier this year it appointed restructuring advisers to help pay down a $240 million (£141 million) debt pile.

But the spotlight is now on Mr Charney's controversial behaviour.

In 2011, four female former employees filed a lawsuit accusing Charney of sexual harassment, including claims that he sexually assaulted one of them during a job interview. He is also said to have walked wearing nothing but underpants around the factory floor and bought sex toys for employees.

All the claims were either settled or dismissed.

Born in Montreal, Charney, remains the largest shareholder in the company, and, according to an unnamed source quoted in The Chicago Tribune, he will “fight like hell to get this company back”.