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Highlights
- BlackRock is selling 58 million shares in THG, each priced at 195 pence, at a 10.3% discount on its Monday’s close price.
- BlackRock owned a 10.1% stake or about 124 million shares in THG Group.
The shares of The Hut Group Plc, a UK-based e-commerce company headquartered in Manchester, England, slumped by over 8.10%, currently trading at GBX 199.60 (at 11:11 AM BST) on Tuesday, 2 November 2021. The market capitalisation of the company declined to £2,642.96 million.
What caused the shares to fall?
BlackRock, The Hut Group’s largest institutional shareholder, decided to reduce its stake to half in the company. BlackRock is selling 58 million shares in THG, each priced at 195 pence, at a 10.3% discount on its Monday’s close price. The sale of shares will be valued at a total of £113.1 million. BlackRock owned a 10.1% stake or about 124 million shares in THG.
The shares of the company have been falling for the past some days due to rising concerns about its corporate governance and future of the business after the company declared that profit margins could shrink due to currency changes.
THG, which operates through a network of more than 100 international websites, including Cult Beauty and Lookfantastic, was once a popular choice among investors, as they believed that the company would play an important role in helping manufacturers sell directly to consumers (D2C).
The shares of the company were trading at nearly 800 pence at the beginning of the year, but today the company’s share price has been reduced to under 200 pence.
Asset managers such as BlackRock seem to be losing all confidence in the company’s business and got initially carried away by the hype rather than paying attention to its valuation.
THG’s damage control effort, did it work?
THG is run by its co-founder and largest shareholder, Matt Moulding. He tried to retain investor interest in the company by hiring Russell Reynolds as the head-hunter to find a new non-executive chairperson. Moulding is currently serving as the executive chairman and CEO, which is not in line with the corporate governance code.
THG also aims for a premium listing on the London Stock Exchange (LSE), with the appointment of the new chair. The company appointed Andreas Hansson from SoftBank as its non-executive director to suppress all rumours about its relationship with SoftBank, which invested £530 million ($730 million) in the company in 2021.
Financial performance review
THG shipped more than 20 million orders to 195 countries in H1 2021. The company’s revenue for H1 ended 30 June 2021 was £958.8 million compared to £675.7 million in H1 2020, representing an increase of 41.9% year-on-year. Its THG Beauty business segment registered the highest year-on-year revenue growth of 55.9% to £460.8 million in H1 2021 from £295.6 million in H1 2020. THG’s adjusted EBITDA rose by 38.6% year-on-year to £81.2 million in H1 2020 to £58.6 million in H1 2020.
