The bubble appears to have burst for former stock market darling The Hut Group, as the company’s shares sank for nearly a month.
In the past four weeks, the high-tech fashion company has lost nearly 40 percent of its value after another drop of nearly 5 percent yesterday.
It marks an uncomfortable setback for President and CEO Matt Molding after THG floated last September amid a lot of fanfare and an online boom fueled by a pandemic.
The sale of Hut Group was sparked by rumors that Chairman and CEO Matt Molding (pictured with his wife Jodie) wanted to split the group
The sale was sparked early last month by rumors in the market that Molding wanted to split the group. On September 16, this was confirmed.
In the company’s half-year results, THG released below-average numbers and said it would list its beauty division separately in 2022, while also continuing to list its other nutrition and tech businesses on the stock exchange.
One analyst said: “I was stunned. Growth numbers were lower than expected and Molding was basically telling us that the group was breaking up.
There was no detailed explanation for the decision and no breakdown of the value of individual businesses. THG is shaping up to be a very different company from the one listed a year ago. ‘
Molding defended his position, saying he believes the market has undervalued these three companies, adding that they would be better off on their own.
But others disagree, arguing that there has been no pressure from big shareholders to make the decision.
On the contrary, the appeal may have alienated heavy backers, including Goldman Sachs and The Capital Group, who soon after the results sold off much of their stakes.
Analysts have since calculated the numbers and believe THG Beauty, which includes brands such as Espa and Lookfantastic, could be floating to a value of £ 4 billion.
THG Nutrition has not been assigned a value, although that could also run into the billions.
Barclays analysts warned that “valuing companies seems a bit difficult without disclosing stand-alone margins.”
The lead analyst added: “To be honest, that’s really the bottom line at the moment. There just isn’t enough information to know exactly what the different parts are worth.
Casting has in the past challenged skeptics and its sometimes unconventional approach has largely paid off so far.
But some investors aren’t sure THG plans to start its Ingenuity division, a tech company that helps other brands sell online.
Ingenuity only accounts for 9% of the group’s sales, but it has established blue-chip customers including Toblerone and Coca-Cola.
Rumors about the company’s future began in May when THG struck a complex joint venture deal that gave Softbank the opportunity to acquire a 19.9% stake in Ingenuity, valuing the tech branch alone. to £ 4.2 billion.
Molding, at the time of half-year results, said: “From the moment we announced the deal with Softbank, it was a question of when, not if we would. [beauty] spin off.’
All eyes are now on Tuesday next week when a capital markets day hosted by Molding attempts to allay investor fears about the company’s future.
This cannot come quickly enough for Molding to stem the fall in the share price.
In truth, question marks have hung over 49-year-old THG and Molding for a long time.
He is a true self-taught entrepreneur and a generous charitable donor from a working-class background. But there are governance issues that still have not been resolved.
He has been criticized for holding both the roles of executive chairman and managing director, as well as a “golden action” that allows him to block hostile takeover attempts for three years.
At the time of the float, THG also sold many of its real estate assets to Molding, leaving the company to pay its founder £ 19million in rent per year.
The company has still not disclosed the value of the real estate portfolio, and all investors know that THG is leasing it 15 warehouses and offices, including giant facilities in Warrington in Cheshire and another near Wroclaw in Poland, as well as a chain of office buildings in Northwich, also in Cheshire.
Neil Wilson, Analyst at Markets, said, “I think we’ve all got a little carried away with molding. The City should have been much more sober in its relations with him.
Casting has seen an impressive rise, from humble beginnings to success in the Square Mile. Now he faces one of his biggest challenges to regain the favor he has worked so hard for.
The big names who support the company
Former Tesco boss Sir Terry Leahy (pictured) has long supported Molding
The drop in shares of The Hut Group has undermined investments made by some of the UK’s best-known businessmen and fund managers.
Founder Matt Molding has seen his stake drop from £ 1.2bn to £ 724m since early September and his wife Jodie has seen his stake drop on paper by £ 26m. He is now valued at £ 41million.
Sir Terry Leahy, an early investor in THG, has seen his stake drop from £ 36million since early September to £ 57million. Former Tesco boss Leahy has long supported Molding.
Likewise, former Debenhams boss Terry Green and non-executive director Iain McDonald both saw their stake drop from £ 17million to £ 10million.
Another who has seen his shares fall is independent director and private equity baron Dominic Murphy, whose stake has lost £ 39million to £ 61million.
But managing director and non-executive director of publisher Future, Zillah Byng-Thorne, once again proved to be a savvy trader, selling most of her stake in August when she took in 1.4 million. sterling of shares.
Big fund managers weren’t immune either, and Blackrock saw the value of its stake drop from £ 358million to £ 565million.
Balderton Capital saw its stake increase from £ 663million to £ 406million.