Shares in online health and beauty products seller THG (THG)  failed to arrest Tuesday’s huge selling volumes in early trading on Wednesday in wake of yesterday’s disastrous capital markets day.

The event for analysts and fund managers was designed to explain the potential of its Ingenuity e-commerce platform. But rather than bring clarity and optimism it badly flopped, sending the stock plunging by 30%.

That tumble continued on Wednesday as the disappointment analysts felt over limited financial detail at yesterday’s event seeped into the wider market. At around 11am, THG stock was trading roughly 3% lower at 277.2p.

Ingenuity is seen by most analysts as THG’s future growth engine, a one-stop-shop that allows businesses to quickly get online, providing web selling and logistics for brands that want to sell direct to the consumer. Clients include giants like Nestle and Coca-Cola, plus smaller operations such as UK-listed Hotel Chocolat (HTOC:AIM).

In May, Japanese tech investor Softbank bought an option to buy a 19.9% stake in THG Ingenuity that valued the division at £4.6 billion, more than THG’s entire £3.6 billion market cap.


Investors are clearly struggling to value Ingenuity, while founder, chairman and CEO Matthew Moulding’s planned break-up of THG is creating more questions than answers.

In a response to yesterday’s share price mauling THG released a statement today saying that it ‘knows of no notifiable reason for the material share price movement, and that no material new information was disclosed at the event’.

THG, also known as The Hut Group, stressed that since its September 2020 stock market listing (IPO, or initial public offering as the process is called), it has ‘consistently delivered ahead of its targets set at the time of the IPO. The company recently reported a strong first half performance across all divisions with group sales growing 44.7% year-on-year to £958.8 million.

Scheduled to issue a third quarter trading update later this month (26 October), THG also flagged its ‘very strong liquidity position’ as it enters its peak trading season.


Irish broker Davy remarked that the ‘unprecedented decline in THG’s equity’ during yesterday’s capital markets day ‘clearly indicated that the market took little comfort from the investor event, which contained less financial detail than hoped.

‘Negative share price reflexivity now shapes the narrative, with valuation and fundamentals ranking junior to sentiment. The forthcoming trading update now takes on greater significance - with heightened focus around the Ingenuity sales ledger and broader disclosure. At the current share price, the market-implied valuation of THG Ingenuity is close to zero.’

Numis Securities reinstated a target price of 230p with a ‘reduce’ recommendation, explaining that Ingenuity is ‘critical in many ways, but feels increasingly nascent, opaque and lacking sufficient proof points to justify a significant valuation.’

The broker added: ‘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.’

Elsewhere, Russ Mould, investment director at AJ Bell, pointed out THG’s share price freefall creates a conundrum for investors.

On one hand, ‘sentiment is incredibly weak towards the stock and there is no point going against the flow if the market has decided THG is a dud’. But on the other hand, ‘investors are now being given the chance to snap up shares in a business at a price where the original source of excitement is now essentially thrown in for free.’

Mould added: ‘The big question is what each business would look like as a standalone entity, namely the cost base, capital expenditure and cash flow.’

THG has been criticised for not being open enough about the financial breakdown.

‘Until it starts providing some answers, the shares could well remain under pressure as it’s very hard to properly value this business without all the right information.’


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Issue Date: 13 Oct 2021