Key points:
- Belerion and Lion have pulled out from their indicative THG bid
- Nick Candy has also decided to not make a full bid
- This leaves THG shares with no obvious support
Predictably, now that the varied offers for THG (LON: THG) shares seem to have failed the value of those shares has slumped another 15%. At under 90 pence what we knew as The Hut Group, now that THG, is getting close to a full pound under what those indicative bids were thought to be, around 170 pence. Part of the problem is that Matt Moulding, the somewhat embattled CEO, has a golden share arrangement although he's said that he will change this.
As the FT reported yesterday the most likely approach, from King Street and Belerion, was facing a deadline of today. Having made an even indicative suspicion of making an offer they had until today to move forward, if they didn't then they're blocked for another 6 months. They didn't, so that's that. The vaguer alternative from Nick Candy also faced the same deadline. No news, so no bids therefore.
In the announcement this morning THG notes that it didn't take any of the (there have been others) approaches seriously enough to allow people access to the books to do due diligence. “….the Board has not considered it appropriate to provide due diligence access to any of these parties”. That can be seen one of two ways, as arrogance from a management being offered near twice the market price, or possibly as a vote of confidence in the corporate future.
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One result of this is that Belerion and King Street are now blocked from making a new offer for 6 months unless “…following the announcement of a firm intention to make an offer for THG by or on behalf of a third party;” There are other such get outs but that's the main one. If a serious offer is made then they can return.
Given all of this we've not got to try and value THG as a standalone company. The absence of bidders for THG means that it's purely its own business performance that matters now. There's increasing competition – WPP is to compete with THG's sites – for example. At least some of the bloom is coming off online fashion retailing, as Boohoo and Asos are showing.
On the other hand it is just about possible that Matt Moulding is getting the message from the market. The underlying performance of the group does impress, there's clearly great retailing skill being deployed here. One of the major concerns though is that Moulding is though of – perhaps unfairly – as not being quite right to be chairman of a publicly quoted group. Those reports of short sellers trying to deliberately do him down and so on don't impress the very investors he needs to carry along with him.
So the future path of THG shares is difficult to predict. In the absence of another offer there's no one event that looks likely to produce a significant revaluation. The only impetus would be the business performance of THG itself and that's clearly going to take months, if not years, to make a significant difference. It could just be the doldrums of the THG share price for some time as a result.
