Wednesday 13 October 2021 10:37 am

£2bn loss in 15 mins: THG in the dark over what caused share price drop of 35 per cent

THG said today it still has not figured out what caused the online retailer’s share price to nosedive by 35 per cent during a shareholder meeting yesterday afternoon, wiping £2bn off its value.

The firm’s management stressed they had not revealed any new information that might have caused such a major swing in the embattled company’s share price.

But the event, which was called to calm the nerves of shareholders, clearly had the opposite effect.

Up until the point at which boss Matt Moulding started speaking, THG’s shares had been trading down just 2 per cent yesterday afternoon. They plunged following his speech, closing down by more than a third.

The drop wiped nearly £2bn off its market value.

“THG notes the fall in the share price yesterday following the capital market event, and confirms that it knows of no notifiable reason for the material share price movement, and that no material new information was disclosed at the event,” according to a statement issued today.

THG said that since listing in September 2020 it has consistently delivered results ahead of targets.

It also has a “very strong liquidity position” going into a peak trading season, THG said.

Investors not calmed

But as markets opened on Wednesday morning, investors did not seem particularly calmed by the statement.

Shares yo-yoed between a 7 per cent rise and a 10 per cent drop in just the first half hour after trading started.

The group’s share price has been under pressure for months. It is just 13 months since the company’s shares started trading in London at 500p each. They are now worth less than 300p.

What was meant to set THG apart when it listed was its technology, which it was able to sell to other online retailers.

The system, called Ingenuity, would position THG in a similar category to online supermarket Ocado, or energy supplier Octopus, who gained massive valuations from selling their technology to others in the sector.

But investors have been unsure about what exactly Ingenuity does. This was in part what Tuesday’s meeting was called to explain.

Ingenuity has been described as anything from a social media influencer platform to a platform to handle logistics.

Following the share price collapse, analysts at Jefferies noted investors now seem to think Ingenuity is practically worthless.

Even if valuing other parts of the business conservatively, Ingenuity’s value might now be £0, at least according to the company’s share price.

It is a far cry from May, when Japanese investor SoftBank signed a deal which would let it buy a fifth of Ingenuity when THG sells the unit. The agreement valued Ingenuity at £4.5bn.

“Quite clearly, the reassurance that today’s event should have delivered failed to materialise. And sentiment has taken over from fundamentals,” Jefferies analysts said.

But they added that an update on the third quarter results, which is due on October 26, and more clarity on the SoftBank relationship, might help turn things around.