Key Points:
- THG has not had a good time of it since flotation and the important question is what happens next.
- The concerns at The Hut Group seem to be about management structure and strategic vision
- The company’s complaints about short selling just aren’t helping matters though
The Hut Group PLC (LON: THG) shares – or THG PLC as it likes to be known now – are down another 5% this morning which isn’t good news for shareholders, obviously. Even before this latest fall, the THG shares are down 75% from their peak.
There are obvious areas of value within THG but the problem the market has is with the link up with Softbank, the management style, the strategic vision and so on. Nothing that can be specifically pointed at and an “Aha!” but perhaps a general feeling that it’s not, quite, all there. This is of course terribly frustrating for the management.
And yet the latest news over the weekend, which seems to have triggered this latest share price fall, is of the company complaining of the way it is being treated by the market.
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Specifically, THG had an investor day back in October where they tried to explain all that strategy and management style stuff. The corporate valuation dropped £2 billion as all of that was happening – that’s likely to produce some ire.
But what is now happening is that THG is alleging – or demanding an explanation of – what they claim is a concert party in short selling. This doesn’t though work – which is just increasing the uneasiness the market has with the management style, strategic vision and so on.
Now, if the specific allegations are true then there’s a case. If people did coordinate – become a concert party – to short the stock and then drive the price down then that’s market abuse. It’s the coordination that is the claim and problem. If it’s just a cascade of information – one decides the price should be lower, others then independently follow – then that’s just how markets work. The coordination, if it existed, would be an inverse pump and dump and those are naughty.
But here’s why the insistence on that having happened by management isn’t boosting the share price. Because such coordination would only have a short-term effect on that share price at THG. But the effect on that share price has been long term – yes, 3 months is long term in this sort of stock market thing.
So, the general market view becomes, well, it doesn’t actually matter whether there was that coordination in short selling and driving the price down. Well, obviously it matters to the FCA who the evidence has been presented to. But it doesn’t matter in explaining THG’s share price right now. That’s still low and that must be for other reasons than a concert party pushing the price lower back in October.
So, if management is spending all this time and effort on proving the concert party problem they’re missing the point. That’s all history – what are you doing about the share price and the business right now? Still, going on about October? Then you don’t understand the market’s worries about the THG share price, do you?
That is, even if the allegations from THG are true they’re not the solution to that current THG share price. The big question then becomes well, what will be? Two possibilities come to mind. One is a set of trading results that put the issue to bed. The other would be the appointment of a City veteran as Chairman for that would show that the market worries were being taken seriously. THG should probably be taken as speculation on either of those happening.