THG to Spin Off Its Tech Platform, Ingenuity, in Blow to Founder’s Vision
The British e-commerce firm THG (formerly known as The Hut Group) announced Tuesday that it will spin off its technology platform, Ingenuity, in a move that marks a significant departure from founder Matthew Moulding‘s ambitious plans to establish a major publicly-listed technology name in the U.K. This decision comes as THG continues to grapple with a market downturn that has significantly impacted the value of its shares.
Key Takeaways:
- THG is spinning off its technology platform, Ingenuity, a move that could simplify the company’s structure and improve shareholder understanding.
- The demerger is intended to address investor concerns and improve the company’s prospects in the market.
- The move comes after SoftBank, a major investor in THG Ingenuity, exited its investment and sold its entire stake to Moulding.
- THG’s market struggles have led to a significant drop in share price from its peak in 2020, prompting Moulding to criticize the U.K.’s IPO market and advocate for listing on U.S. exchanges.
- The demerger and the transfer of THG shares to the ESCC segment aim to boost the company’s chances of inclusion in major U.K. stock indexes, potentially attracting more passive investment and increasing liquidity for its shares.
Pushing for FTSE Index Inclusion
In conjunction with the Ingenuity spinoff, THG is also planning to transfer all its currently publicly-traded shares to the newly created ESCC (Equity Shares Commercial Companies) segment of the London Stock Exchange. This move aligns with recent efforts to reform London’s listings rules and make the exchange more attractive for high-growth tech companies. The creation of the ESCC segment aims to facilitate the inclusion of companies in major blue-chip stock indexes, like the FTSE 100, which previously excluded companies listed on the standard segment.
THG believes that this move will positively impact the company by increasing its likelihood of being included in U.K. stock indexes. This, in turn, is expected to improve passive investment flows and liquidity for company shares.
THG’s Public Market Struggles
Since its peak during the tech rally of 2020 and 2021, THG’s share price has steadily declined, eroding significant value and disappointing initial investors.
"Shares hit an all-time intraday high of £800 a share in December 2020. Today, they’re trading at £57.65, a fraction of the value they were worth at the peak of the Covid-driven boom in tech and e-commerce stocks."
The market struggles have prompted Moulding to express his dissatisfaction with the U.K.’s IPO process and advocate for listing on U.S. exchanges.
"THG’s IPO ‘sucked from start to finish’ and was ultimately a ‘mistake.’ It would have been better to float THG in the U.S. rather than the U.K." – Matthew Moulding, Founder of THG
These comments reflect the challenges faced by tech companies seeking to raise capital in the U.K. market amidst concerns over valuations and the lack of investor appetite for growth-oriented companies.
A New Chapter for THG?
The decision to spin off Ingenuity represents a significant shift in strategy for THG. This move, coupled with the planned transfer to the ESCC segment, is a response to the company’s market struggles and an attempt to address shareholder concerns.
"The demerger will simplify our structure and allow investors to understand the business better." – THG statement
The success of these changes will depend on THG’s ability to execute the demerger effectively and to demonstrate its commitment to profitability and shareholder value. The spinoff of Ingenuity, in particular, could have a significant impact on the company’s long-term growth trajectory.
"THG is facing a challenging market environment, but the company is taking steps to improve its position. The demerger is an example of the proactive measures that THG is taking to enhance its performance." – Analyst comment.
The changes announced by THG signal a strategic shift for the company, attempting to adapt to the evolving market landscape and create a more investor-friendly structure. Whether this approach will be successful in revitalizing the firm’s fortunes remains to be seen.
