Shares of a British e-commerce firm, backed by Softbank, are in freefall

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  • The SoftBank-backed firm’s stock suddenly fell during afternoon trading and reached its worst single-day performance since listing on the London Stock Exchange last September.
  • The move came after the company’s capital markets day, which set out to reassure investors and analysts that THG could turn things around, is now down 65% since the end of the year.
  • In a statement to the market on Wednesday, THG said that “no new information was disclosed at this event.”

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LONDON – British e-commerce company THG has said it knows of “no notable reason” for the 35% drop in its share price on Tuesday.

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The SoftBank-backed firm’s stock suddenly fell during afternoon trading and reached its worst single-day performance since listing on the London Stock Exchange last September.

The move came after the company’s capital markets day, which set out to reassure investors and analysts that THG could turn things around, is now down 65% since the end of the year.

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In his presentation, intended to address concerns and explain THG’s Ingenuity sales platform, CEO and founder Matt Molding lambasted short-sellers, but analysts were left disappointed.

In a statement to the market on Wednesday, THG said that “no new information was disclosed at this event.”

“Since its IPO in September 2020, THG has consistently exceeded its IPO targets and recently reported a strong first half performance across all divisions, with group revenue of £958.8 million ($1.31 billion). ), +44.7% year-on-year,” the company said.

“The Group also has a very strong liquidity position as it enters its peak trading season, with long-term 3-5 year features of £700.0 million with cash available as of 30 September 2021.”

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Although the capital markets heyday is intended to help analysts and investors better understand certain aspects of a business, THG’s effort was “eye-opening for the wrong reasons”, according to Russ Mold, investment director at British online stockbroker AJ Bell. .

“It seems attendees didn’t get the level of information they wanted, and messages were quickly sent back to headquarters to dump the stock,” Mold said.

“After much fanfare in the stock market, the market is now contemplating that THG was overvalued and that the breakout of the business raises more questions than answers.”

THG, formerly known as The Hut Group, sells vitamins, nutrition and beauty products, running brands such as MyProtein, Lookfantastic and Mankind, while licensing its technology. Its 500 pence per share IPO was one of the biggest technology floats of 2020.

Since announcing plans in September to spin off its beauty business in favor of focusing on THG Ingenuity — an e-commerce platform that handles web sales and logistics for companies to sell products directly to consumers — the group’s The share price has crashed.

SB Management, a division of Japanese tech giant SoftBank, announced in May that it would invest $1.6 billion in Ingenuity, giving it a 19.9% ​​stake, while also holding a $730 million stake in THG itself.

An ‘enigma for investors’

Shares of THG initially began a rally before falling more than 10% on Wednesday, and were down 4.6% as of late morning. Mold suggested that valuations after Tuesday’s freefall presented “an enigma for investors.”

“On the one hand, sentiment towards the stock is incredibly weak and there is no point in going against the flow if the market has decided that THG is a bullshit.”

“On the other hand, investors are now being offered the opportunity to snap up shares in a business at a price where the original source of enthusiasm is now essentially free-thrown.”

THG Ingenuity initially generated much enthusiasm, with major clients including Nestle and Unilever giving it significant credibility for investors.

Mold suggested that a lot of product manufacturers now want direct-to-consumer service, which means that the growth prospects for the business are theoretically strong.

SoftBank’s buy option values ​​the Ingenuity division at £4.6 billion at current exchange rates, but at Wednesday morning’s share price, the entire group was valued at around £3.15 billion, Mold highlighted.

Mold said this would effectively mean investors could buy beauty and nutrition operations while still getting the technology and logistics offerings for “nothing.” However, the bigger question is what each business would look like as a standalone entity in terms of cost basis, capital expenditure and cash flow, he suggested.

He said, “THG has been criticized for not being open enough about the financial breakdown. Unless it starts responding, stocks could remain under pressure because without all the right information, this could be the case.” It is very difficult to value the business properly,” he said.

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