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THG sees no reason for share slump as volatility continues

By Reuters

By Sachin Ravikumar

– British online retailer THG‘s shares seesawed on Wednesday after a badly received investor presentation drove the stock 35% lower the previous day, even as the company said it did not know of a reason for the slump.

THG said no material new information was disclosed during the presentation and it knew of “no notifiable reason” for the share price drop. It added its liquidity was strong ahead of its peak trading season, with 700 million pounds ($953 million) of cash available as of Sept. 30.

Shares in SoftBank-backed THG, which went public in a bumper initial public offering last September, plunged late Tuesday, registering their worst one-day performance.

The stock rose as much as 8.8% early Wednesday, before falling nearly 13%. It was last down 2.4% at 277.2 pence.

Graphic: THG shares

Tuesday’s presentation focused on THG‘s e-commerce services business Ingenuity, a direct-to-consumer sales and logistics platform which it sells to companies such as Nestle.

Investors were disappointed by the lack of financial detail provided about Ingenuity, analysts said.

“We believe the company missed the opportunity to present satisfying additional stats and the detailed disclosure the investor community was hoping for,” J.P. Morgan Cazenove analysts said in a note.

THG said in May it planned to spin off Ingenuity into a separate company, with Softbank having an option to inject a further $1.6 billion into Ingenuity at a valuation for the business of $6.3 billion.

But with the recent slump in its shares – down 65% so far this year – THG itself is valued at only about $4.8 billion, meaning Ingenuity’s market-implied value is now close to zero.

“The market now seems to be taking the view that THG was grossly overvalued and that breaking the business up creates more questions than answers,” said Russ Mould, investment director at AJ Bell.

“Until it starts providing some answers, the shares could well remain under pressure as it’s very hard to properly value this business without all the right information.”

Shares in THG, which also plans to separate and list its beauty business next year, had already fallen by a third in the four weeks prior to Tuesday amid reports that short-sellers were targeting the company.

Swiss hedge fund PSquared Asset Management AG had a short position of 12.3 million shares, or 1.01% of THG shares, as of Aug. 24. Tuesday’s share fall made PSquared a potential profit of 18.7 million pounds, according to data from financial analytics firm Ortex.

($1 = 0.7334 pounds)