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Why London’s listing regime is not to blame for THG’s troubles

On Monday, the United States reopened its borders to welcome the British again, and THG founder Matt Molding heard the message clearly and loudly.

“I should have done an IPO in the US,” said the Mankunian group boss. I told GQ last week In an extraordinary interview.

Instead, Molding chose London for The Hut Group’s 2020 float. Since he published the largest list on the market in five years, his company “has been in the press a lot.” “There hasn’t been a positive day since the IPO,” he said for the business, “being sucked in from start to finish,” and the lesson learned from all of this is “no IPO in the UK.”

Hearing Molding, where his beauty and supplement online retailers traded, would have made all the difference to THG’s performance as a publicly traded company (market capitalization reduced from £ 5.4 billion to £ 2.5 billion). Raised $ 1 billion in additional shares in May).

There is no doubt about the evaluation of the technology platform division called Ingenuity Commerce. IngenuityCommerce generated £ 11.7m in revenue in the last quarter, but previously supported the group-wide investment case. There is no uncertainty as to whether SoftBank will exercise the option to buy a 19.9% ​​stake in Ingenuity, even though it can buy 45% of the company at the same price. And it does not slow the organic growth of THG’s core business.

Molding is correct that listing in the United States may have benefited. He suggested that there was “no profile” and no one would have written about him. That’s probably true. If Kazoo, a UK-based online car reseller that unveiled in New York this year, goes public in London, it will undoubtedly receive much more coverage. In London, it’s big enough to fit in the FTSE 100. instead, Kazoo noticed that it was a blank check vehicle in itself, Valuation of $ 7 billion and quiet time in the British press.

However, anonymity is usually not the purpose of companies entering the market. It’s about attracting investors.

The traditional attraction of New York’s capital markets to London is that they support a deeper and richer reputation. Investors there aim to better understand high-growth tech businesses and tolerate founder-led businesses with unusual governance arrangements.

Well, perhaps THG could have persuaded the fund manager to squeeze out more cash in New York. But in London it wasn’t too difficult. 4 key investors We supported the company’s IPO. They included BlackRock, the Qatar Investment Authority and Janus Henderson. A sophisticated investor who can write quite a few checks. Numis calculated that Ingenuity was valued higher than US-listed e-commerce companies Shopify and BigCommerce before THG’s stock began to fall in September.

New York clearly accepts founders who want to retain control of the company more easily, but THG is an example of how London can live in such an arrangement when investors believe the prices are right. was. Indeed, THG was excluded from the FTSE 100 because of the golden share of the molding, giving him the power to thwart the acquisition. Investors bought this issue anyway. Governance wasn’t an issue as long as it went well.

The problem for THG is that the technical shades that allowed the stock to trade where they went are fading. Unless SoftBank intervenes to save the day, regaining the group’s reputation will require significant evidence of the potential revenue of THG’s e-commerce platform.

If the molding suffers from the listing experience in London, the London market may still suffer. It is a pity.

The London Stock Exchange needs a larger list of technologies to avoid becoming a collection of old economic assets. Like the genomics group Oxford Nanopore, Wise and Darktrace are good examples. Treating online retailers such as Moonpig Group and Made.com as if they were a tech group rather than an e-commerce company wouldn’t help. THG may still indicate that it is a true technology platform. It hasn’t done enough yet.

As with the LSE and the government, there are many reasons to reform the UK’s IPO process. Trying to do.. However, THG’s poor price performance is not an argument for doing so.

Why London’s listing regime is not to blame for THG’s troubles Source link Why London’s listing regime is not to blame for THG’s troubles

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