Under pressure technology and e-commerce group THG was in crisis fighting mode today after a disastrous capital markets day sent the company’s share price into free fall.
THG crashed after a disappointing meeting between management, analysts and investors. The company tried to stem the bleeding this morning with a statement saying there was “no notifiable reason for the material share price movement, and no material new information”. The company highlighted strong recent trading and a cash balance of £700 million heading into the crucial Christmas trading period.
Analysts rounded on the business, saying management had failed to address concerns that have been simmering for weeks.
The stock gyrated wildly this morning, opening 8% higher before dropping into negative territory and then flipping between gains and losses. It was down 1p, or 0.3%, to 283.9p by mid-morning — well below its 500p float price and still down by more than 60% since the start of the year.
Shares collapsed 35% late on Tuesday in the wake of the capital markets day. It wiped off £1.8 billion in value.
“The equity tells you that management have lost the trust of the market,” said Roland French, an analyst at stockbroker Davy who attended yesterday’s meeting.
THG hosted the meeting with the City to give more details about its e-commerce platform Ingenuity, used by customers including Nestlé and Homebase.
THG, previously called The Hut Group, last month announced plans to spin out its beauty business and instead focus on Ingenuity. The deal is underpinned by a complex investment from Japanese investment company SoftBank, which values Ingenuity at $6.3 billion.
THG’s stock has more than halved since that announcement. The company has not disclosed detailed information about the division, leaving questions about where revenue comes from and growth prospects.
“The lack of visibility is coming back to bite them,” said Eleonora Dani, an analyst at Shore Capital.
THG founder and CEO Matt Moulding blamed a short selling attack for recent share price weakness at yesterday’s capital markets day. THG was the target of a negative research note from private firm The Analyst. Disclosures show 1% of THG’s stock is on loan to short sellers.
Attendees of Tuesday’s meeting were left frustrated that Moulding failed to address the issues raised in the research note and gave little in the way of in-depth detail about Ingenuity.
JPMorgan said THG “failed to address current investor concerns” and left attendees of yesterday’s meeting “with several questions.”
Numis today set a new target price of 230p for THG — almost half the target it had a month ago.
“Ingenuity is critical in many ways, but feels increasingly nascent, opaque and lacking sufficient proof points to justify a significant valuation,” analyst Simon Bowler said.
THG Beauty, the division being spun out, generates annual sales of around £750 million. Ingenuity generated £20 million of revenue last year and is forecast to bring in £50 million this year.
“We worry enthusiasm for Ingenuity is likely to wane, whilst stalling momentum and concerns over the margin structure of the trading businesses offer only limited support,” Bowler said.
Investors worry THG’s share price fall could prompt SoftBank to reconsider its investment. Management insists that the deal is still on.
THG Beauty is to be separated and listed on a public share-trading exchange in 2022. THG will remain the largest shareholder. THG will report its third quarter update on October 26.