The Hut Group's shares continue to slide

By

Sandra Halliday

Published
Oct 5, 2021

The Hut Group shares continued to fall on Tuesday morning after a period of decline that had already seen the firm losing a quarter of its market value in just two weeks by Monday’s stock exchange closing bell.

It may have been something of a shock for the company that has been used to a largely upwards trajectory since it first listed its shares last autumn. In fact, the fall means its current price of around £4.28 each is well down on its near-£8 high in the New Year.

That price was a jump on its £5 listing price but it first fell below that level on Friday when the shares were down 10%.

So what’s going on and is this investor selling activity a sign of weakness at the company in general? Not necessarily, but it is a sign of uncertainty around its future plans.

The company has grown from its launch in 2004 when it sold DVDs to be one of the world’s major beauty e-tailers and also the operator of webstores for other companies via its THG Ingenuity division.

Analysts have said there are a number of reasons for the share sell-off, one of which is that the company is shaping itself into a very different business than the one that listed on the stock exchange. That could be seen early on from it selling a stake to Japan’s Softbank with the firm having the option to buy an even bigger chunk of THG Ingenuity.

News that it will spin off its beauty operation into a separately-listed company means a huge chunk of its revenue will become part of a different business. A break-up of the business they bought into could worry some of the institutional investors that acquired shares because of the strong prospects they saw for the beauty industry in the years ahead and because of its proprietary technology.

In fact, some of those selling shares in recent weeks have included big names Goldman Sachs, BlackRock, Credit Agricole and Deutsche Bank. Goldman actually sold a third of its holding with it shedding at least £180million worth of shares.

Some observers have also said that a profit warning from electrical retailer AO World last week could have hurt other online retail shares, as could the recent trading announcements from Boohoo and ASOS.

But the company is holding a capital markets day next week so it will be interesting to see whether founder and company chief Matthew Moulding will be able to soother investor worries.