THG unaware of reason for 35% share price slump
THG, formerly The Hut Group, said on Wednesday that it was not aware of any reason for the slump in its share price a day earlier.
Shares in the company tumbled 35% on Tuesday after it held a capital markets day that had been meant to assuage investor concerns about its Ingenuity sales platform.
Independent retail analyst Nick Bubb said the investor presentation was "very disappointing".
He noted that Bloomberg reported on the share price slump just after 1615 BST, after THG said in the Q&A session that Japanese investment giant SoftBank would not be exercising its option to buy a stake in the Ingenuity business early.
"It’s not as if anybody had expected this, but the news appeared to spark some investor concerns about the future financing of the business, as well worries that the Softbank deal might have to be re-negotiated," Bubb said.
"Yet, if truth be told, the share price had begun to slump about an hour earlier, at around 1515 BST, as investors realised that management was failing to provide any new P&L information about its much-vaunted ‘end-to-end technology platform’, Ingenuity.
"The presentation was 54 pages in total (including fulsome tributes from clients like Revolution Beauty, Hotel Chocolat, Coca-Cola Europe and Homebase), but the last 15 pages were taken up by guff about the company’s 2030 Sustainability Strategy, which we flagged yesterday morning was unlikely to have had sceptical investors reaching for their buying boots."
Bubb said management had "muffed the chance to convince investors that Ingenuity was a business of substance and value".
JP Morgan, which rates the stock at 'overweight', said the CMD failed to address current investor concerns and the bank is left with several questions for management.
"The event was widely anticipated among investors as an attempt to address current concerns/bear arguments around the quality/setup of the Ingenuity business. Management described the 'short seller attack' (CEO Matt Moulding) on the stock and aimed to provide further detail on the division, its current setup and the value Ingenuity adds to its clients.
"During the event, management provided a detailed overview of the different offerings within Ingenuity and also presented showcases (and the management teams) of customers who have successfully grown their business through partnering with the Ingenuity platform (Revolution Beauty, Coca-Cola EuroPacific Partners, Homebase, Elemis and William Grant & Sons).
"Despite the additional disclosure during the session, we believe the company missed the opportunity to present satisfying additional stats and the detailed disclosure the investor community was hoping for - with a corresponding share price reaction."
THG said on Wednesday that it "knows of no notifiable reason for the material share price movement, and that no material new information was disclosed at the event".
"Since its IPO in September 2020, THG has consistently delivered ahead of its targets set at the time of IPO and recently reported a strong first half performance across all divisions, with group revenue of £958.8m, +44.7% YoY (CCY)," it said.
The group also insisted it has a "very strong" liquidity position as it enters the peak trading season, with available cash of £700m as at 30 September 2021.