Oct 13, 2021
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Hut Group defends performance as shares plummet by a third

Oct 13, 2021

A capital markets day is meant to boost a share price as the company concerned talks major investors through its strategy. But in the case of The Hut Group (THG) this week, it had the exact opposite effect.

The Hut Group

After the share price had faltered in recent periods, the beauty-retailer-cum-tech-pioneer held a capital markets day on Tuesday and the firm’s share plunged nearly 35% as a result.

On Wednesday, the company issued a stock exchange statement 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”.

And it defended its record since it first listed its shares a little over a year ago.

"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 £958.8 million, +44.7% YoY (CCY)”, it said. 

The group also has a very strong liquidity position as it enters its peak trading season, with available cash as at 30 September 2021 of £700 million across long dated 3-5 year facilities.”

The share price fall had wiped almost £1.9 billion from the firm’s market value as investors were clearly unimpressed by what founder Matthew Moulding had to say.

There had been a number of concerns pre-event and reports suggested that Moulding and co-founder John Gallemore failed to reassure investors about the firm’s future plans and profitability. 

While THG has been affected by investors ‘shorting’ the shares — that is, betting that the price will fall — it also appears to be the victim of elevated expectations and worries over its future direction.

Some investors appear to be concerned about the company’s plan to split itself up via a separate listing of its giant beauty retail ops as it focuses on its THG Ingenuity technology offering that helps retailers set up slick e-commerce operations. Coming relatively soon after its listing, it’s perhaps throught that what THG investors would be left with is a very different (and smaller) company from the one they bought into last year.

There were also suggestions that the share price fall was less about whether the beauty ops and the THG Ingenuity arm could thrive separately and more about the lack of detail that was provided.

There also seem to be some worries that Softbank, which is a current THG Ingenuity investor and due to invest further could be dragging its feet after it was revealed it wouldn’t yet be exercising an option to take an enlarged stake.

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