Eye of storm: THG boss Matt Moulding
Online shopping mogul Matt Moulding is preparing to make sweeping changes to the way he runs his company after a torrid week that saw billions wiped off the value of his THG business.
The entrepreneur listed his company just over a year ago but has been battered in recent weeks by a stream of criticism over how the business is run and its failure to disclose information that investors say is now vital to lifting the share price.
In a desperate effort to calm investor jitters, Moulding is poised to scrap his 'golden share' – a powerful tool that allows him to exercise his influence over other shareholders and potentially block a hostile takeover.
It would also set THG – formerly known as The Hut and which operates a Beauty, Health and an online shopping technology division Ingenuity – on a trajectory to a premium listing on the London stock market from its current standard listing. That would automatically give a broader range of funds access to the stock, theoretically supporting the share price.
The board is also considering appointing Andreas Hansson, a senior SoftBank executive, as a non-executive director, Sky News reported. The Mail on Sunday also understands that Moulding is being pressed to accelerate plans to publish more detailed financial disclosures after Tuesday's disastrous presentation that wiped £417,000 per second from the company's value in just one nail-biting hour of trading.
One investor said providing more information on the firm's core beauty business, which operates as Lookfantastic, would help investors 'wrap their head around the biggest piece of the puzzle' and restore some faith. Providing the market with more frequent, up-to-date group cashflow forecasts would also help erase 'question marks' through what is likely to be a turbulent few months, an investor said.
The company is expected to make a statement on the changes to governance as soon as this week. It is also due to deliver a trading statement in just nine days time – another chance for executives to present an olive branch to investors already nursing humungous losses after the price hit a low of £2.48 on Wednesday morning last week.
Even after recovering marginally mid-week, the shares ended Friday at just £2.98 – less than half the price a month before.
The market has become nervous that online retailers, often with tiny profit margins, will find it hard to cope with prolonged economic turbulence. Shortages and supply chain delays have hit every part of retail and industry this year.
But the complex nature of THG – whose valuation is as much built on faith in management as it is on profit – has come to the fore as the share price fall prompted investors to take a second look at the firm's prospects.
Last weekend, The Mail on Sunday published a highly critical note from secretive outfit The Analyst warning its shares could drop to £2.60. A week earlier, we had exposed a sudden retreat by several major shareholders.
THG still has many many fans, including Powerful Japanese investor SoftBank which emerged as a key backer in May. It acquired shares and signed an option to buy 20 per cent of THG's technology and delivery business Ingenuity when it splits from the main group next year and ascribing it a standalone value of £4.5billion. It is said to be a long-term supporter and almost certain to remain so.
But investors want to know what wriggle room SoftBank has to renegotiate its option if the share price fails to recover. There are also concerns that promises of closer commercial ties with corporations, including Nestle, have yet to materialise.
Moulding told investors on Tuesday the share price drop in the previous ten days was due to an 'attack' by short-sellers – investors who make money by betting on falling share prices. But IHS Markit data indicates the number of short sellers peaked at less than 2 per cent on September 29 – a fortnight before the presentation – and dropped steadily to just 1.24 per cent on the day.
The real rout arrived late on Tuesday as executives opened the online presentation to questions. Apparently dissatisfied with the lack of visibility on Softbank's Ingenuity option, THG shares went into freefall wiping £1.6billion off the value in just one hour before the market closed.