THG CEO, President, and Founder Matt Molding says going public “just sucked from start to finish.” Here’s how it all went wrong for the one-time stock market darling.
HG, formerly The Hut Group, has been having a miserable time since its much-talked-about IPO in September 2020.
After seeing its stock rise more than 60% in the first few months of its listed life, the stock has fallen to less than half its IPO price. Most of the damage has been done in the last few months.
CEO, president and founder Matt Molding said that going public “sucked from start to finish,” he said. told GQ last week, He has blamed small sellers for his woes. Others point to concerns about governance, strategy and a complicated deal with Japan’s SoftBank.
Here’s how it all went wrong.
From e-commerce darling to fallen star:
June 2020: THG, formerly The Hut Group, publicly shares details of its financial performance ahead of the upcoming stock market float. Sales grew 24% to £1.1 billion in 2019 and gross profit increased 22% to £511 million.
The company sells health products such as lip glosses and vitamins online through brands like LookFantastic, Illamasqua, MyProtein, and many more.
August 2020: Prior to the IPO, questions arise over THG’s corporate governance: as well as remaining chairman and chief executive, the molding company is the landowner for the assets as well as retains a controversial gold stock blocking the firm from appearing in the FTSE indices. Is. However, nothing as sluggish as corporate governance can keep investors away from their desperate desire to find the next Amazon.
September 2020: THG is valued at £5.4 billion as it is listed on the London Stock Exchange at 500p per share. The stock soars and founder Matt Molding goes to bed that night worth £1.1 billion. They first launched a website (then called The Hut) in 2004 to whip up cheap CDs and DVDs from the Channel Islands. in the press, He is called Britain’s answer to Jeff Bezos.
January 2021: Shares peaked at 837p, over 60% off float value.
Some early supporters sell more shares. Venture capital fund Balderton Capital sells 27.4 million shares and West Coast Capital Assets sells 4.1 million. Both of these backers were subject to a post-IPO lock-up period, prohibiting them from selling for the time being, but unusually, the banks running the process waived the agreements.
THG says the £250 million share sale is in response to huge demand from institutions in the city. The company says that this offer was subscribed seven times.
around the same time, Investors Chronicle runs an article asking whether the “hype” around THG is justified., adding that “it’s hard to see why this could stand out from the crowd”.
May 2021: THG struck a complicated deal with tech investment giant SoftBank centered around its small but rapidly growing platform business Ingenuity. The deal values the software system at £4.5 billion. Ingenuity handles everything from online orders to delivery for the brand. Its logistics and warehousing technology is used by firms including Nestlé and Coca-Cola Europe.
SoftBank invests $1 billion in THG at the time, with cash earmarked for the acquisition. It has the option to buy Ingenuity’s stake at a later date.
August 2021: THG bought the website Cult Beauty for £275 million. The deal “wasn’t a negative catalyst in itself, but it undermined the balance sheet,” says one retail-watching banker who is very embarrassed about his initial enthusiasm for THG to give his name.
September 2021: Shares fell 4% as the company plans to spin off its beauty division (which accounts for about half of revenue) in a separate listing next year. THG will remain the largest shareholder but this structure puzzles some investors.
The parent company will instead focus its efforts on ingenuity, which again belongs to some. “This big turnaround, coming within a year from the initial listing, was not good news or timing,” says Eleonora Dani, analyst at Shore Capital.
Beginning of October 2021: Investment firm The Analyst has published a negative research note on “overhyped” THG that says growth forecasts for Ingenuity are “unrealistic”, which THG disputes.
mail report That analyst previously ran highly critical reports on Wirecard, Debenhams and Carillion, all of which ended up losing out.
The analyst highlighted that 2010 listing plans for The Hut were pulled after auditors PwC flagged an issue with documentation. A THG spokesperson told the Guardian that the issue was “related to the actions of two junior individuals” who have since left the company. THG states: “Contemporary independent review and the court found that THG was not aware of their actions nor system problems caused reporting inaccuracies and THG took immediate corrective action on the finding.” THG states that he raised the money privately in September 2011.
Dani adds: “The analyst reports the first time THG had actually seen negative press.”
Shares weaken even further on the report.
13 October 2021: A week later, THG holds its inaugural capital markets meeting, where “investors expected a little defense [from Moulding], but instead received a speech from him complaining about petty attacks,” says Dani. JP Morgan left the investor meeting saying that THG “failed to address existing investor concerns.” The rest of the city agreed. are; shares fall 35 percent
20 October 2021: Under pressure from declining share price, Molding agreed to lose its “golden share”, which it controversially retained in the IPO. This allows him to block any hostile takeover for three years. In the same week, the CEO also restructured a personal loan of £100 million using THG shares as collateral. The stock rose 2%.
26 October 2021: THG posted a 38% increase in revenue to £507.8 million in the three months from September and raises growth expectations for Ingenuity – but warns that currency fluctuations will shrink profit margins. This causes the shares to fall again.
To change corporate governance, Molding brings on headhunter Russell Reynolds to find a new non-executive chair. THG also appoints a new non-executive director: Dr. Andreas Hansen, Managing Director of SoftBank.
The city is unconvinced: Simon Bowler in Numis flags the “deteriorating pace of core businesses and the deteriorating cash profile”. Shares fell another astonishing 20% on the day.
2 November 2021: Shares fell to a new record low after THG’s biggest institutional investor BlackRock nearly halved its 10% stake, selling 58 million shares at a price of 195p each.
“Nothing really happened in THG to justify its reappraisal, there was no terribly harmful [trading] number, but minutes [a company] Investors lose trust, it’s hard to get it back,” says Dani. “There’s a lack of transparency, and opportunities to clarify to investors are missed. I think the banks basically got the valuation wrong and things started getting worse, THG lost momentum.
5 November 2021: Molding tells GQ magazine viewers that he’s had “a sh*tty time” since THG’s IPO, which “sucked from start to finish.”
The CEO once again blamed short sellers for his woes, with figures showing that only a small number of shares are out on debt. Molding says there are “unknown shorts” that “operate from the Bahamas or from Switzerland.”
Molding says he wanted New York to be on the list instead of London, indicating that he might make the company private again. He says he has “options” as a “large shareholder,” who owns more than half the business with “a few people I’m close with.” Shares rose up to 5% on bid speculation.
A retailer in the city says: “[Moulding] To do so would require someone to provide equity financing and it is not clear who that would be.
“Investors don’t want this volatile set of comments from the chief executive of their business, in the same way they didn’t like Capital Market Days and short-sellers.”
Shares – which were over 800p in January – are now trading at just over 200p.