Matthew Moulding, CEO of The Hut Group © Jon Super

Matthew Moulding’s The Hut Group has more than a little of the Ocado about it. Plenty of promises about end-to-end ecommerce solutions for slow off the mark retailers, and a pretty share price despite not much profit.

Shares in the Burnley billionaire’s muscles-to-make-up online retailer have soared roughly 45 per cent since THG made its debut last month on the London Stock Exchange. Monday’s third quarter trading update helped. THG raised revenue guidance for the year from £1.43bn to up to £1.52bn, around a third better than 2019. Its equity is now worth almost £7bn.

THG brings in most of its money selling beauty and nutrition products straight to consumers online, with brands from Myprotein to Mio skincare. Roughly 80 per cent of revenues for the year so far come from its beauty and nutrition divisions. THG hasn’t given guidance on profits, but previously those only existed before adjusting items. Mr Moulding is keen on investment, and acquisitions. 

Ocado was a direct to consumer retailer once, too. That bit of the business, now part of a joint venture with M&S, is hardly what earns Ocado its £17bn market capitalisation.

Likewise the big hope for THG is not Myprotein or Mio but technology platform Ingenuity Commerce, being put to use in partnerships with consumer goods companies such as Nestle and Procter & Gamble to sell their wares directly to end users — THG’s end-to-end ecommerce offering. Mr Moulding reckons Ingenuity Commerce could someday be a very material part of the business. 

It isn’t now. Its growth is impressive — 171 per cent year to date for Ingenuity Commerce — and margins high. But that’s not hard when all that growth only gives you £12m in revenues, out of £1.05bn for the group as a whole. True, most revenues will come later through recurring licence fees or revenue sharing. Still, it’s difficult to attach much weight to such an early stage part of THG’s rag bag of retailing. 

Limited visibility on potential profitability hasn’t hurt Ocado with its robot warehouse contracts. Nor has Ocado CEO Tim Steiner’s £54m bonus. THG investors are similarly unperturbed by Mr Moulding’s dual roles as chief executive and chairman, his unusual incentive scheme, golden share or status as its landlord. 

Mr Moulding’s Instagram feed shows he regularly loses his shirt, in the literal rather than figurative sense. So long as The Hut Group’s technology tinge continues to win out, investors will hang on to theirs.

LSE bets on PrimaryBid

When in April the Financial Conduct Authority loosened its rules on pre-emption rights in response to the Covid-19 pandemic, the resulting flood of issues may have saved a few companies’ bacon, Jonathan Ford writes. But it also raised the blood pressure of Britain’s retail investors.

Left in the cold as a wave of large companies placed billions of shares with big investment institutions, without offering all existing holders the right to participate, they watched while the directors of those same companies cut themselves profitably into the action. Take Asos, which raised £247m in April at £15.60 a share. The directors, who put up £663,000 saw their investment almost triple to £2m in just a few months.

Hence the interest in PrimaryBid, a four-year-old fintech company that has just closed a $50m (£38m) funding round, including investment from the London Stock Exchange (LSE), which has purchased 9 per cent. Set up by two former investment bankers, PrimaryBid aims to right these wrongs, aggregating retail orders either through its own app or a network of brokers and participating in rapid and non-pre-emptive placings.

The company’s business has prospered during the pandemic. Of the 90 issues it has participated in since 2016, 41 have been since April. That’s partly because there has been a boom in institutional placings. Aside from the distressed issuers, companies have opportunistically tapped the market to take advantage of the FCA’s willingness to allow non-pre-emptive issues of up to 20 per cent.

The LSE says its interest stems from a desire to protect retail investors, who still make up 13 per cent of the UK market. As well as the stake, it has a commercial agreement with PrimaryBid that entitles it to a split of the company’s fees (which are equivalent to the 1-3 per cent charged by banks to companies on the amount raised in a placing).

The potential for a substantial conflict of interest seems fairly limited. EU rules limit PrimaryBid’s participation in each placing to €8m (£7m), and the FCA’s derogation on pre-emption may yet be rescinded. Unsurprisingly, the company is using the funding to spread its activities into continental Europe.

PrimaryBid may be an imperfect mechanism for avoiding dilution. But it may at least shame directors into not cutting retail punters out of an offering. Savers should remember however that it’s not always wise to give in to FOMO. When housebuilder Taylor Wimpey raised £515m in June it did so at a price of 145p a share. The current price? 115p.


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