THG Shares Drop Following £95 Million Fundraising Plan and Ingenuity Division Demerger

THG Plc’s stock has recently declined after the company announced plans to raise £95.4 million through an oversubscribed share placement. This initiative is part of a larger strategy to streamline its business model by separating its Ingenuity division.

As of 4:13 am (0813 GMT), THG’s shares were trading 5.8% lower at £48.70. In a filing, the Manchester-based firm reported that it successfully raised the funds by issuing 194.7 million new shares at 49 pence each, reflecting a 5.2% discount to the previous day’s closing price. The new shares account for 14.6% of the existing stock. CEO Matthew Moulding led the fundraising with a personal investment of £10 million, while long-term institutional investors contributed around £50 million.

Analysts from Jefferies described this move as strategic, allowing investors greater control over their demerger distributions. They noted that this would leave a remaining company composed of two high-quality, strategically relevant, cash-generative global consumer businesses, thereby unlocking potential valuation improvements.

Frasers Group, which maintains an ongoing partnership with THG, also invested £10 million in the initiative. The new capital will support THG’s strategy to separate its Ingenuity division, which specializes in technology and e-commerce services. This decision aligns with the company’s goal to concentrate on its core businesses in beauty and nutrition, where it aims to become a more profitable global consumer entity.

The anticipated demerger is expected to streamline THG’s operations, enhancing cash flow, capital expenditures, and the overall financial position of the company. Jefferies expressed optimism regarding THG’s demerger plans, believing that it would clarify the investment case, alleviate a significant cash drain from the listed operation, and leave behind a company that consists of two strategically relevant, cash-generative global consumer businesses.

Nevertheless, the fundraising initiative, which also included a retail offer that raised £5.4 million, did little to quell market apprehensions. Since its initial public offering in 2020, THG has faced increased scrutiny, with critics questioning its valuation, governance structure, and the performance of its various divisions. The partnership with Frasers Group aims to leverage technology and e-commerce solutions, including integrating Frasers’ loyalty platform into THG’s operations, and Jefferies sees potential for a significant upward revaluation.