October 23, 2021

The Hut Group crisis deepens over ‘loss of trust’ as rout continues

The Hut Group crisis deepens over ‘loss of trust’ as stock market rout continues










Hut Group founder Matt Moulding has seen the value of his 14.2 per cent stake fall by £701m in the last five weeks

The City rounded on The Hut Group and its founder yesterday as the firm tried to defend itself amidst a stock market rout. A disastrous presentation led investors to take flight, wiping £1.8billion off the value of the company in just two hours on Tuesday. 

Yesterday the firm, known as THG, was in crisis mode as analysts panned the company’s ‘unproven’ investment case and ‘loss of trust’. Shares fell 2.9 per cent, or 8.4p, to 276.6p, considerably below the 500p that the shares floated at in September 2020.

Matt Moulding, the company’s founder and executive chairman, has seen his 14.2 per cent stake fall by £701million in five weeks. Yesterday financial adviser Numis slashed the target price for shares to 230p suggesting the stock has even further to fall. The collapse helped short-seller PSquared, which took a 1.01 per cent bet against the stock last week, to a profit of around £45million.

In a rearguard action, THG put out a statement saying there was ‘no notifiable reason for the material share price movement, and no material new information’.

The Manchester-based group, which sells clothes, make-up and protein shakes online, highlighted its ‘strong’ recent trading and a cash balance of £700million. 

In an attempt to arrest the share-price fall, non-executive director Damian Sanders bought £49,700 of shares at 297.6p per share. The move came as some City analysts suggested now was a good buying opportunity for investors.

The share price has been under pressure after THG made a surprise announcement to spin out its beauty business to focus on its logistics platform, Ingenuity, an ‘unproven’ loss-making business.

Russ Mould, director at AJ Bell, said: ‘This creates a conundrum. On the one hand, there is no point going against the flow if the market has decided THG is a dud.

‘On the other hand, investors are being given the chance to snap up shares at a price where the original source of excitement is essentially thrown in for free. 

THG Ingenuity was the reason why the market was initially excited, a one-stop-shop handling web selling and logistics, aimed at brands seeking to sell direct to the consumer.’

A note from The Analyst claimed THG’s shares had been ‘overhyped’ and were worth just 260p, putting pressure on Moulding to answer questions as a capital markets day event on Tuesday. 

But the meeting was a disaster, and investors flooded for the exit, driving the share price down by 35 per cent. The business is effectively undergoing a restructuring a year after listing.

Simon Bowler, at Numis, said: ‘We worry enthusiasm for Ingenuity is likely to wane.’ Roland French, at Davy, said: ‘Management has lost the trust of the market.’

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