THG lost a third of its value on Tuesday after its chief executive bungled a presentation to investors and claimed the London-listed online retailer was under a “short attack” from hedge funds betting against its shares.
Matthew Moulding, executive chair and chief executive of the company formerly known as The Hut Group, hit out at short sellers at a “capital markets day” on Tuesday. The meeting was widely seen as an attempt to reset negative commentary and explain the value of the group’s white label online retail business, THG Ingenuity.
However, the share price of the Manchester-based seller of make-up and protein shakes tumbled as much as 33 per cent on Tuesday afternoon as investors were left disappointed by the company’s presentation. The shares had already almost halved in value this year as analysts and investors have questioned the company’s technology.
THG, which Moulding founded in 2004 as an online CD seller, raised £1.9bn last year, in one of the London market’s largest recent IPOs.
Switzerland’s Psquared Asset Management is the only disclosed short seller betting against the company’s stock, with a position equivalent to just over 1 per cent of the shares. This puts THG outside of the top 50 most-shorted companies on the London stock market, while data from IHS Markit shows that just under 2 per cent of its shares are on loan to short sellers.
THG’s chief financial officer John Gallemore, a longtime business partner of Moulding who has been with the company since its inception, said the objective of the investor meeting was to do a “better job” of explaining its Ingenuity subsidiary, which offers other brands access to the company’s online retailing platform and logistic capabilities through white-labelled websites.
“The genius of THG Ingenuity is making the complex simple,” said Gallemore.
Expectations for the subsidiary were heightened after Japanese technology investor SoftBank invested $730m in THG’s shares in May, in a complex deal that also gave it an option to buy a 19.9 per cent stake in THG Ingenuity for $1.6bn within 15 months. THG’s shares are now trading more than a third lower than the 596p price SoftBank invested at.
The SoftBank investment was made through the same unit that carried the “Nasdaq whale” trades in US technology stocks last year. It was spearheaded by Akshay Naheta, a former Deutsche Bank trader and hedge fund manager, best known for his intricate $1bn bet on the fraudulent technology company Wirecard.
THG last month said it planned to list its beauty division separately in 2022, and could also pursue stock market listings for its other main businesses in nutrition, and technology and logistics.
The company has attracted scrutiny for a series of property transactions it entered into with Moulding before the company listed. Separately, a UK local council provided one of its largest loans of more than £150m to Moulding to facilitate the construction of new properties for THG’s use.
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