The Hut Group (THG), the Manchester-based ecommerce group that listed to much fanfare last year has seen its share price take another steep hit over the past two days. The drop wiped another £1 billion off THG’s market capitalisation in a brutal period for the company since early September.
THG got off to a positive start to life as a public company with investors seemingly relatively relaxed about the unorthodox corporate governance at the group, where co-founder Matt Moulding acted as chief executive, chairman and landlord while retaining a golden share that gave him almost absolute power.
When THG floated at a valuation of £5.4 billion in November last year the company was hailed as the kind of homegrown, high growth, tech company the London Stock Exchange badly needs. I argued recently, and still think the arguments are valid, that THG could become the UK’s largest tech company. With the potential to achieve a valuation, if not quite in the realms of big tech in the USA, beyond what any London-listed company has to date.
For the first couple of months after the company listed, THG’s share price rallied from its IPO price. It then stalled and went into decline as markets questioned the value of THG’s Ingenuity platform, the proprietary technology it sells into other companies as an all-in-one ecommerce solution.
After a sharp slump in in THG share price over the past few weeks, with investors worried about corporate governance, pressure on margins, and the valuation of Ingenuity, it now sits at less than half its 500p listing price. A presentation designed to reassure investors over how much Ingenuity is worth by explaining it to them backfired badly and saw the company lose 35% of its value in its aftermath.
That trend is continuing with the most recent share price crash coming after THG again tried to provide more details about Ingenuity and reassure over corporate governance. Last week Mr Moulding announced he will give up his golden share next year and yesterday investors were told the company will bring in an independent chair of the board ahead of a premium listing next year and presumed entry to the FTSE 100.
Softbank executive Andreas Hansson will also join the board of THG as a non-executive director though there have been mutterings how independent he can be considered when Softbank owns 10% of the company. The move is designed to reassure markets a deal between THG and Softbank giving the latter a 19.9% stake in only the Ingenuity business at a value of £4.5 billion will go through.
Hansson commented he believes the company
“has the right suite of products to serve this market, and we continue to be confident about our investment in THG and Ingenuity”.
Over the quarter to the end of September, The Hut Group’s revenues of £507.8 million were 34.3% compared to those from the same period a year earlier and 86.2% higher than two years ago. However, sales growth at the company’s nutrition business Myprotein dropped to 9.5% over the third quarter, a significant slide on growth rates over previous quarters.
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