By Kristy Dorsey
The head of battered ecommerce group THG will surrender his “special share” in the business as the company looks to restore investor confidence following sharp falls in its share price.
Chief executive and co-founder Matthew Moulding will give up ultimate control of THG, previously known as The Hut Group, by the end of next year. This will allow THG to step up from a “standard” to a “premium” listing.
Mr Moulding’s special share was created at the time of THG’s flotation in September 2020 and was due to remain in place for three years, giving him the right to veto any takeover attempts. Companies with a dual-share class structure such as this are currently barred from a premium listing, meaning they are not included in FTSE indices that index-tracking investment funds are obliged to buy into.
Yesterday’s announcement saw THG recover some of the ground lost last week following a bungled presentation to shareholders. The group – whose online beauty and nutrition brands include Zavvi, Glossybox, Lookfantastic and Myprotein – lost more than a third of its value in a single day.
READ MORE: Crisis continues at Zavvi owner THG following share price crash
Manchester-based THG noted that a premium listing will give all shareholders the opportunity to vote on future “material” acquisitions. THG has spent some £800 million on acquisitions in the year since its flotation.
The company will also be required to comply with rules on the announcement, and in some cases approval of, related-party transactions between different parts of the group. This could allay investor unease about the lack of information on cross-charges between its Ingenuity technology division and other businesses within THG.
In May, Japanese tech investor SoftBank signed an option agreement to acquire nearly a fifth of Ingenuity – which provides an end-to-end service for companies selling consumer goods online – in a deal that values Ingenuity at about £4.4 billion. THG has announced its intention to demerge the division from its retail businesses.
Although THG “currently complies with many aspects of the UK Corporate Governance Code”, the group said it will further undertake a review of its governance arrangements in conjunction with its application for a premium listing.
READ MORE: Hut Group, a Tom Hunter investment, delivers strong online sales
Such a review might lead to the appointment of an independent non-executive chairman, as is common among UK listed companies. Mr Moulding is currently executive chairman as well as chief executive, and is also the group’s largest individual shareholder with a 14.2 per cent stake in the business.
“After the anniversary of our 2020 listing we feel that the time is right to make this next step and apply to the premium segment in 2022, thereby continuing development of THG as we endeavour to deliver our strategy for the benefit of our shareholders, key stakeholders and employees,” Mr Moulding said in yesterday’s statement.
Reaction among analysts was mixed, with house broker Jefferies saying the announcement “points to the group’s willingness to engage on shareholder concerns”. Others, however, remained sceptical.
“This dual-class structure was only ever going to last three years,” said Neil Wilson, chief analyst for Markets.com. “Bringing forward the move by a year is not exactly sweeping reform, nor is it a magic wand.”
Nevertheless, shares in THG closed yesterday’s trading more than 20% higher, up 59.4p at 348.8p, That, however, is still well adrift of their 500p flotation price.
Scotland’s Sir Tom Hunter was an early backer of THG, which began life in 2004 as an online seller of tax-free CDs. His West Coast Capital investment group currently holds a 1.22% stake in the business.
The Financial Conduct Authority (FCA) has proposed allowing dual-class share structures for “innovative, often founder-led companies” for the first five years of a premium London listing. The move is designed to encourage more technology company flotations.
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