THG, previously known as The Hut Group, is a British e-commerce company. On Tuesday, the firm announced plans to spin off its technology platform, Ingenuity, affecting founder Matthew Moulding’s vision of establishing a large, publicly-listed technology firm in the U.K.
In an investor update, THG stated that it is “actively undertaking detailed work to review potential structures to facilitate the demerger of THG Ingenuity.” The company, however, did not provide a specific timetable for the demerger, citing ongoing considerations of possible options. It mentioned that structuring tax clearances have been approved by HMRC, the U.K.’s tax collection authority.
The proposed demerger would necessitate shareholder approval. THG plans to provide more information on the proposal to its shareholders at a later date. Upon approval, THG’s group company will be composed exclusively of its THG Beauty and THG Nutrition divisions, a move anticipated to simplify its structure and improve investor understanding.
Shares of THG fell by about 10% during morning trading on Tuesday.
THG established THG Ingenuity in 2021 as a separate venture offering e-commerce solutions to retailers. Matthew Moulding has referred to THG Ingenuity as a “social media influencer platform” aimed at promoting both THG and other companies’ products. This venture was initially supported by Japanese tech investment firm SoftBank, which purchased an 8% stake in THG for £481 million in May 2021. The deal included an option for SoftBank to invest an additional $1.6 billion in THG Ingenuity. However, SoftBank terminated its investment agreement and sold its stake in THG back to Moulding in October 2022.
In addition to considering a spinoff for its Ingenuity division, THG plans to transition all its currently publicly-traded shares to the newly created equity shares commercial companies (ESCC) segment of the London Stock Exchange (LSE). Previously listed on the standard segment of the LSE, firms in this category are ineligible for inclusion in major blue-chip stock indexes, such as the FTSE 100.
Following feedback from tech executives and investors regarding London’s IPO market structure, regulators and officials within the LSE, U.K. government, and Financial Conduct Authority (FCA) collaborated to reform London’s listing rules and enhance its appeal for high-growth tech firms. Earlier this year, the FCA introduced the ESCC among other changes as part of broader reforms to the U.K.’s listings environment.
THG stated that the new listing structure would increase its chances of being included in U.K. stock indexes, consequently improving passive investment flows and liquidity for its shares.
THG has faced challenges in restoring its share value to the highs observed during the tech rally of 2020 and 2021, spurred by stay-at-home trends and the broader transition to online shopping. Shares reached an all-time high of £800 per share in December 2020 but currently trade at £57.65, a small fraction of their peak value.
Concurrently, Moulding has been an outspoken critic of London’s market for tech listings. He revealed in a 2021 interview with GQ Magazine that THG’s IPO “sucked from start to finish” and was a “mistake,” expressing the opinion that it would have been better to float THG in the U.S. rather than the U.K.
