THG suffers further decline as share price continues to tumble
Manchester online retail giant THG (The Hut Group) continues to see its value decline following another tough opening on the markets.
Its market capitalisation began to tumble on October 13, following a disastrous capital markets day where it shared its 2030 sustainability strategy with investors.
This wiped £1.85bn from the company’s market value after share prices dropped by a third.
Five days later, in a move to assuage investors, Matt Moulding, the executive chairman and chief executive of THG, announced he would scrap his ‘golden share’ which allows him to exercise his influence over other shareholders and potentially block a hostile takeover.
On October 26, THG delivered a third quarter update showing it had achieved more than £500m in sales, up 34% on last year and 86% on the pre-pandemic 2019.
However, this failed to reassure jittery investors, and last Wednesday THG endured another torrid day on the markets as its share price crashed 21%, closing at 242p.
THG floated in September 2020, at 500p-per-share, rising to trade at nearly 800p at the start of this year, when its market cap got close to £10bn.
Today, however, its shares had fallen even further in early trading, and its market capitalisation stands at roughly £2.47bn.
Russ Mould, investment director at Manchester investment platform AJ Bell, said today: “For a while THG was a stock market darling with investors clambering to own the stock in the belief it would play a key role in helping product manufacturers sell direct to consumers.
Russ Mould, AJ Bell
“Now it is losing fans at an incredibly rapid rate.
“The shares peaked at nearly 800p at the start of the year, and today they briefly traded below 200p amid chatter that BlackRock is trying to dump a block of shares.”
BlackRock later confirmed its intention to offload a portion of its stake in THG. It had a 10.13% stake of nearly 124 million shares as of mid-October, but said later this morning (November 2) that it would offload 58 million at a price of 195p each – a 10% reduction to Monday’s closing price.
Mr Mould added: “Asset managers rarely sell after a stock has already fallen so much unless they’ve lost all confidence in the business and/or found something that completely changes the investment case.
“The backlash against THG seems to centre on the fact that people bought into the hype without paying attention to valuation.
“Now that difficult questions are being asked about costs and more, particularly if the business is broken up into three as per the suggestion from THG, investors aren’t getting the answers they want – or they are not liking what they see.”
The group’s shares closed the day’s session 20p down, at 197.40p per share, a new low for the stock, representing a 9.20% fall on the day, and valuing THG at £2.41bn.
