“The lack of visibility is coming back to bite them,” said Eleonora Dani, an analyst at Shore Capital.
THG founder and CEO Matt Moulding blamed a short selling attack for recent share price weakness at yesterday’s capital markets day. THG was the target of a negative research note from private firm The Analyst. Disclosures show 1% of THG’s stock is on loan to short sellers.
Attendees of Tuesday’s meeting were left frustrated that Moulding failed to address the issues raised in the research note and gave little in the way of in-depth detail about Ingenuity.
JPMorgan said THG “failed to address current investor concerns” and left attendees of yesterday’s meeting “with several questions.”
Numis today set a new target price of 230p for THG — almost half the target it had a month ago.
“Ingenuity is critical in many ways, but feels increasingly nascent, opaque and lacking sufficient proof points to justify a significant valuation,” analyst Simon Bowler said.
THG Beauty, the division being spun out, generates annual sales of around £750 million. Ingenuity generated £20 million of revenue last year and is forecast to bring in £50 million this year.
“We worry enthusiasm for Ingenuity is likely to wane, whilst stalling momentum and concerns over the margin structure of the trading businesses offer only limited support,” Bowler said.
Investors worry THG’s share price fall could prompt SoftBank to reconsider its investment. Management insists that the deal is still on.
THG Beauty is to be separated and listed on a public share-trading exchange in 2022. THG will remain the largest shareholder. THG will report its third quarter update on October 26.
