British E-Commerce Giant THG to Spin Off Tech Services Division, Shares Drop

19.09.2024

British e-commerce firm THG announced on Tuesday its plans to spin off its technology platform, Ingenuity, marking a setback for founder Matthew Moulding’s ambition to establish a major publicly-listed tech entity in the U.K.

In an investor update, THG, formerly known as The Hut Group, revealed it is actively reviewing potential structures to facilitate the demerger of THG Ingenuity. While the timeline for the demerger remains uncertain as options are considered, the company has received tax clearance approvals from HMRC, the U.K. tax authority.

The proposed demerger, which requires shareholder approval, will result in THG’s group company consisting only of its THG Beauty and THG Nutrition divisions. The company believes this will simplify its structure and enhance investor understanding of its business.

Following the announcement, THG’s shares dropped over 12% on Tuesday.

THG Ingenuity was established in 2021 as a separate venture providing e-commerce solutions for retailers. Moulding had described it as a “social media influencer platform” to promote various products, including those from THG and other brands. The venture was initially supported by Japanese tech investor SoftBank, which acquired an 8% stake in THG for £481 million in May 2021 and had the option to invest an additional $1.6 billion in Ingenuity. However, SoftBank ended its investment deal in October 2022 and sold its entire stake back to Moulding.

Alongside the Ingenuity spin-off, THG plans to transfer its publicly-traded shares to the newly created Equity Shares Commercial Companies (ESCC) segment of the London Stock Exchange. This move aims to increase the company’s chances of being included in major U.K. stock indexes, such as the FTSE 100, which was not possible under the standard listing segment.

THG has faced challenges in regaining the high share value from the tech boom of 2020 and 2021, when shares reached an all-time intraday high of £8. Currently, they are trading at 57.65p, reflecting a significant decline from the peak of the pandemic-driven surge in tech and e-commerce stocks.

Moulding has been vocal about his dissatisfaction with London’s market for tech listings, describing THG’s IPO experience as a “mistake” and suggesting that a U.S. listing might have been more beneficial.