Market Thinking

making sense of the narrative

THG Life..not so good

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We have felt obliged to comment in the past on the curious beast that is The Hut Group, or THG as it is known, not least because it seems to defy every aspect of corporate governance that any one caring about the G in ESG might consider important, but also because of its relentless PR onslaught in the UK financial press and its (in our view egregious) use of a ‘tech status’ to persuade UK retail investors that an online e-tail business was worth 7x sales. The fact that it got into bed with our old friends, the ex DB derivatives traders at Softtouch was hardly re-assuring, nor was the announcement of plans to spin off its main online sales businesses – presumably at tech valuations – but we didn’t revisit the story for risk of becoming boring. THG was an accident waiting to happen.

However, it is difficult to ignore this. It looks like it has.

THG Share price goes full Wile-E-Coyote.

The redline incidentally is the 670p level which was the target set such that 15 consecutive days above this level would give the CEO and founder Matt Moulding a further Billion pound of equity. Lucky for him the incorporation in the Stoxx index (whose governance questions were clearly less than the FTSE which refused to let THG into the FTSE100) allowed that to happen. Cue lots of PR spin and shirtless instagram pictures of ‘the tech billionaire’ which if nothing else should have raised a few red flags. Lucky too for the retail sector insiders who all had their restrictions lifted early, allowing them to exit.

The first Capital Markets’ Day came on the back of a steadily weakening share price, which the company blames on short sellers – although it is difficult to see where (there was a small 1% short recorded in the lastest ownership data), but more likely is that the hype around SoftTouch and its option to buy the ‘tech’ part of the business has evaporated. Post the meeting, the shares have gone full Wile-E-Coyote. Even the Times, which has previously appeared to be little more than an extension of the THG IR departement appears to have turned, citing an influential analyst report, which, while only telling what we already knew, appears to have brought on a reality check.

We don’t like to say “I told you so” because a lot of small investors are now heavily underwater, but frankly this should never have got this far in the first place.

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