THG PLC (LSE:THG) could be moving closer to a management buyout after one of its major shareholders took the chance to sell out at a big loss.
Back in September, with shares in the owner of The Hut Group, Myprotein and Cult Beauty falling below 40p for the first time, down 95% from their peak and 92% from their IPO price of 500p from last autumn, we suggested founder Matt Moulding could and maybe should take the company private again.
The following week he did indeed put his money where his mouth was, dipping into the market to buy £1.9mln worth of shares at just 39p.
This week he has been able to buy at that rock-bottom price again, as major shareholder Softbank decided to jump ship, selling its 6.5% stake for £31.4mln – a long way from THG’s agreement last year to sell a £1.6bn stake in its Ingenuity arm to the Japanese investment giant.
Moulding’s FIC Shareco family vehicle bought £5mln of this unwanted chunk of shares, with the Qatar Investment Authority (QIA) hoovering up the remaining £26.4mln.
As it was an existing cornerstone investor in the September 2021 flotation, this might just have been QIA ‘averaging down’ the cost of its stake.
Or it could be leading towards QIA backing Moulding in an MBO or a take-private deal.
“The prospect of this is clearly higher post this recent share deal but it would be pure speculation beyond to opine more,” said analyst Wayne Brown at Liberum.
But he acknowledged that considering THG’s valuation – with a market cap of under £571mln compared to its IPO valuation of £5.4bn and the underlying potential sum-of-the-parts of the group, “a take private could make sense”.
Jonathan Simnett, director of Hampleton Partners, a technology M&A consultancy, said a buy-out is “the most likely strategy” and that “things are heading MM [Matthew Moulding]’s way”.
With Moulding having reportedly trousered £700mln from the IPO incentive scheme, Simnett said Mould should have the resources to significantly contribute to any deal – “assuming he didn’t keep all his gains in shares.”
“Don’t forget he used to be an investment banker so he’ll have a financial strategy. And QIA believe that is the best way to increase the value of their shareholding they’ll back him rather than the markets.”
The market surely thought as much initially, with the shares jumping 10% on Tuesday, though this is still deep under water for anyone who invested before last month.
Other major investors include private equity group Sofina and venture capital group Balderton Capital, which backed THG pre-IPO, while City institutions include Jupiter Asset Management and Goldman Sachs Asset Management.
None of them is likely to accept such a lowball get-out as Softbank, which crystallised a £450mln loss in so doing... that is, unless the shares fall even further.