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£1.8bn wiped off Hut Group shares after disastrous meeting with investors

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THG owns Myprotein
THG owns Myprotein

Shares in The Hut Group plunged by more than a third on Tuesday after a disastrous meeting between founder Matthew Moulding and City shareholders.

Around £1.8bn was wiped off the online beauty company's market value, knocking at least £218m off Mr Moulding's personal fortune, as the 49-year-old failed to assuage fears that the investment titan Softbank is dragging its feet on a transformative deal.

Mr Moulding and his co-founder, John Gallemore, sought to use a capital markets day on Tuesday to reassure investors following a weeks-long run of falling shares amid disquiet over complicated plans to split the business. They blamed hedge funds betting against the company for driving down the value of its stock.

But investors were unconvinced and around 2.30pm - half an hour after the meeting began - shares started to fall rapidly.

They closed the day down almost 35pc at 285p, little more than half of the former market darling’s listing price of 500p last year.

Investors and analysts said that top brass “didn’t do enough to reassure the market” and there was still “a lack of detail” about THG's future plans and profitability.

The company unveiled an intricate deal with Softbank in May, making the Japanese tech investor a cornerstone shareholder.

THG is to spin off its beauty sales arm after a string of bolt-on acquisitions, leaving the rest of the company focused on its technology operation, Ingenuity, which serves as a platform for other retailers.

The division aims to rent out its online retail and logistics infrastructure to third parties as a separate subsidiary in which Softbank said it would invest.

Softbank said it would buy a 20pc stake in Ingenuity for £1.6bn, valuing the division at about £4.5bn. However, the latest sell-off means the whole business now has a market cap of only £3.5bn.

City sources have raised concerns about the announcements, which effectively break up a company that listed on the stock market just over a year ago to much fanfare.

Sherri Malek, an analyst at Royal Bank of Canada, said: “We believe its Ingenuity solution provides a unique element to the equity story, although visibility is low.

“We think market anticipation was high going into the event for the company to provide additional disclosure or more concrete targets, the lack of which failed to reassure investors.”

The investor meeting was led by co-founder John Gallemore, who runs Ingenuity, and two other directors.

On Tuesday, THG said that Softbank would not buy its stake in Ingenuity early in response to a question on whether the timeline would be accelerated. The deal with the tech powerhouse was still on track to be finalised in the first half of the next year, the company said.

One attendee said: “Maybe Softbank is not going to make this investment. If they don’t, as an investor, you are quite nervous.

“THG made it clear that they want to absorb more capital. To find the resources for that cash you either have to put your hand in your back pocket or get diluted.”

Mr Moulding, executive chairman and chief executive, set up the company in 2004 selling CDs and DVDs online and it now sells beauty and skincare products and protein shakes on hundreds of digital shopfronts such as Lookfantastic.com.

As management complained that THG had fallen victim of a “short attack”, a Swiss-based hedge fund made nearly £200m in paper profits over the course of yesterday afternoon.

However, the claims that THG had been on the receiving end of speculators driving the price down raised eyebrows. Only 1.24pc of its stock was on loan to short-sellers, according to the data compiler IHS Markit, leaving it outside the 50 most bet-against companies on the London Stock Exchange.

The Analyst, a research firm, said in a recent note that THG’s flotation was “overhyped” and its stock was worth 260p, about half the offer price, which has contributed to the slide in the share price.

Mr Moulding has not not shied away from the limelight, once posing topless for photos while on holiday in an image that quickly became almost synonymous with the company after it launched on the public markets.

Meanwhile, he took his second-hand car dealer to court over a £360,000 classic Lamborghini that was “not really a car to drive” and allegedly smelled of petrol inside. An out-of-court settlement was later reached in his favour.

The entrepreneur owns almost 12pc of the company through a Guernsey-based investment vehicle called FIC Shareco. His wife also owns a significant chunk of the business.

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