THG, formerly known as The Hut Group, is a UK-based e-commerce company.
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UK e-commerce company THG The company said on Tuesday it was considering spinning off its technology platform Ingenuity, dealing a blow to founder Matthew Moulding’s vision of building a large publicly listed technology company in the UK.
THG, formerly known as The Hut Group, said in an investor update on Tuesday that it is “actively engaged in detailed work to explore potential structures to facilitate the separation of THG Ingenuity.”
“We cannot provide any certainty about the timetable for the demerger at this stage as we are considering options for achieving this outcome, however approval for the tax procedures has been granted by HMRC,” UK tax authority THG added.
The company said any separation proposal would be subject to shareholder approval, adding that more information about the separation proposal would be provided to shareholders in due course.
If the separation is approved, THG’s group of companies will consist of only the THG Beauty and THG Nutrition divisions, which the company believes will simplify its organization and allow investors to better understand its business.
Following the news, THG shares closed down more than 12% on Tuesday.
THG launched THG Ingenuity as a separate venture to sell e-commerce solutions to retailers in 2021. THG’s Moulding previously described THG Ingenuity as a “social media influencer platform” for promoting products, including brands sold by THG as well as brands sold by others.
The venture was founded with the backing of a major Japanese tech investor. SoftBankacquired an 8% stake in THG for £481 million in May 2021. The deal gave SoftBank the option to invest an additional $1.6 billion in THG Ingenuity.
However, in October 2022, SoftBank terminated its investment agreement with THG and sold all of its shares in the company to Molding.
Promoting inclusion in FTSE indexes
As well as proceeding with a spin-off of its Ingenuity division, THG also plans to transfer all of its currently publicly traded shares into a new Equity Commercial Companies (ESCC) segment on the London Stock Exchange.
Previously, THG was listed on the LSE’s standard segment, however companies listed in this category are not eligible to be considered for inclusion in major blue-chip indexes such as the FTSE 100.
After tech executives and investors lamented London’s IPO market structure, officials from the LSE, the British government and the Financial Conduct Authority worked together to reform London’s listing rules to make the exchange a more attractive destination for fast-growing tech companies.
Earlier this year, the FCA introduced the ESCC, among other changes, as part of wider reforms to the UK listing environment.
THG said its new listing structure would increase the likelihood of it being considered for inclusion in UK stock indexes, which would in turn increase passive investment flows and liquidity for its shares.
THG struggles in public markets
THG has struggled to restore its shares to the extraordinary highs they hit during the tech rally in 2020 and 2021, when investors poured money into companies benefiting from stay-at-home trends and a long-term shift to online shopping.
The share price hit an all-time high of £8 per share in December 2020.
The stocks are currently trading at 57.65 pence each, a fraction of their peak when tech and e-commerce stocks boomed during the coronavirus pandemic.
Alongside the company’s struggles with the market, Moulding has been a prominent critic of London’s tech listing market, telling GQ magazine in 2021 that THG’s IPO had been “awful from start to finish” and ultimately a “mistake.”
He also said at the time that it would have been better for THG to list in the US rather than the UK.