The market is starting to rerate the shares at last and as we see more interest develop and institutional investors move towards the shares again, I believe (as per previous comments on here) we will fairly swiftly (by mid July) go through the 100p level, and settle initially around the 150p level. Then it’s the turn of the analysts to point out the obvious bid and break up potential of the company before we see the shares move up to a new trading level.
The point is that this process has now begun and I look forward to a number of jolts upwards in the share price as everyone starts taking their positions before formal bids become public.
I’ve been trading on the market for over thirty years and in my experience, it takes institutional investors some time to catch up with news and the changing position of any particular company unless a bid materialises. In fact it tends to take between one to two months for bigger investors to catch on to such things. I’ve seen this phenomenon a number of times over the years and it’s happening again here at THG.
The problem nowadays is that many larger institutional investors tend to have inept compliance and regulatory hoops they are required to overcome before taking a speculative stance in a share. That means meetings are required both internally and with the company they are considering investing in beforehand and this obviously takes time.
Us smaller investors are much more nimble however, and I think when a large number of such investors are able to voice their views on here, the group view can become akin to the views of professional analysts. Let’s face it, we have all crawled over the various RNS statements from THG. What different advice is a so called professional investor going to advise? They’re not, they’re merely going to be much slower in their responses.
I think the market will therefore have forced the price up materially here by mid August / late August, so ordinary investors have limited time left to pick this share up at such low levels.
You should never use borrowed funds to buy shares, especially the types of very short 14 day loans offered by some stockbrokers.
Buying shares is a luxury purchase, not a necessity, if you can't afford to take a position in a stock, then you should not borrow funds to take that position.
Auditor unable to sign off its accounts. This does not look good
It says a lot about the quality of financial reporting that there’s no Sunday share tip on THG.
Here’s a company that over the last week has seen it produce a really decent trading update, confirm the material deletion of MM’s golden share, and have two directors buy shares; yet no one in the Sunday newspapers thinks it is worth tipping????
This was surely an open goal for any financial commentator and really, it’s on a par with the poor level of institutional analysts understanding of THG where they come out with ludicrous “fair” valuations for the company of 70p, 80p etc.
Clearly THG is speaking one language that most of us are understanding, whilst the institutional analysts are speaking another. One wonders when institutional analysts will wake up to what is going on here. If these institutional analysts don’t think what happened last week was positive, then they should be sacked en masse.
We should also not ignore the potential affect of unexpected macro news. It is now being reported that the Wagner mercenaries who are 50,000 strong, are turning on Putin and taking over various Russian territories. Russian troops are apparently surrendering without a fight.
If the war with Ukraine suddenly comes to an end this weekend and Putin is overthrown, the effect on the stock market will be electric on Monday morning. That alone will probably push up many shares by 5% - 10%.
Yet another factor to consider......
As THG is now in play, all that matters is the 51% club. Moulding owns his shares, other board members own theirs. I doubt MM can actually rely on any of them unconditionally for support if there’s a proper hostile bid. It will then be each man for himself. Predators tend to immediately sack the taken over Board.
Therefore as pointed out before, I’m sure Apollo has been going round the disclosed major shareholders to gauge their separate support for another bid, it’s obviously much cheaper if it’s an agreed deal.
The recent update shows the profitability of the company is improving markedly which will push up the share price and in turn the bid price. Therefore any future takeover offer will have to be at a premium to previous offers.
Exciting times ahead
Https://www.retailgazette.co.uk/blog/2023/06/next-boots-clarks-consumer/
Article on 21st:
"The founder of THG (THG) is to give up his much-publicised special share, the company announced ahead of its annual general meeting today (21 Jun).
The planned move means founder and chief executive (CEO) Matt Moulding loses certain veto powers at the Manchester-headquartered online health and beauty products business. It also means two things can now happen.
First, the removal of Moulding’s special share will allow the company to qualify for a London Stock Exchange premium listing. This will allow THG to enter popular indices, such as the FTSE 250. THG, which rose 3.5% to 75.52p, is now valued at roughly £1.01 billion, comfortably large enough for a spot in the mid-cap index.
According to Sharepad data, UK chemicals business Synthomer (SYNT) is the FTSE 250’s smallest company with a market capitalisation of £342 million. Cruise operator Carnival (CCL) is the largest, worth £14.6 billion.
Joining the FTSE 250 would see large numbers of mid-cap tracker funds and ETFs forced to buy stock, while it may make the shares attractive to some active managers who have not previously been able to invest.
MOULDING’S VETO VETOED
Arguably more important for retail investors, Moulding losing his special share will mean he will no longer have the power to unilaterally veto hostile takeovers. In April 2023, THG revealed an approach for the business by private equity group Apollo Global Management that saw the company’s share price almost double to 117p.
But the subsequent collapse of the stock was even more dramatic after Moulding pulled the plug, saying the deal was not right for THG.
THG is believed to have fielded multiple approaches from private equity buyers in recent years as the company’s shares plunged from highs of nearly 800p 30-months ago. The timing of the special share removal is subject to the outcome of the Financial Conduct Authority’s review for reform of the listing regime, THG says.
BUYOUT BATTLE COULD BE ON CARDS
When the veto powers are removed, it will allow the board to decide if bid approaches should be put before shareholders. This could see private equity investors reignite their interest in a take-private deal, potentially at a large premium to the current market value.
Last year Moulding gave up his chairmanship of THG after City criticism, appointing Charles Allen, Lord Allen of Kensington CBE, as non-exec chairman, allowing Moulding to concentrate on the CEO role."
Https://www.bing.com/ck/a?!&&p=607df86b576cc589JmltdHM9MTY4NzU2NDgwMCZpZ3VpZD0zODA1ZDUyNC1hNTY4LTYxMWUtMGNhOS1jNzRmYTQ4ODYwMWYmaW5zaWQ9NTMxOA&ptn=3&hsh=3&fclid=3805d524-a568-611e-0ca9-c74fa488601f&psq=shares+magazine+thg&u=a1aHR0cHM6Ly93d3cuc2hhcmVzbWFnYXppbmUuY28udWsvbmV3cy9zaGFyZXMvdGhnLWZvdW5kZXJzLXNwZWNpYWwtc2hhcmUtdG8tZ28tdGhpcy13aWxsLWFsbG93LXR3by10aGluZ3MtdG8taGFwcGVu&ntb=1
I think the valuation of the parts is more like:
Ingenuity: £1+ a share
Beauty: £1.50+ a share
Nutrition: £2+ a share
In other words the company is probably worth around £4.50+ when valued fairly. That explains how it was floated a few years ago at £5 a share and then went on in a very hot market to reach £8 a share.
No wonder Apollo was interested, Now, as yesterday's update shows, profitability and cashflow are rapidly improving, and combined with the golden share going, it is obviously time for the group to be revalued, radically.
Clearly such a revaluation will get an almighty jolt once we move onto the premium sector of the market......
Am sure we are now going to see a number of days with decent rises each day immediately coming up.
Presumably going over £1 sometime next week, especially if we get a decent weekend press article in the Sunday newspapers.
I will be amazed if the price remains below £1 much longer. AS the City wakes up to this RNS and that the golden share is gone, the revaluation we all thought likely from mid September has now been clearly brought forward three months. This must be great news. I thoroughly expect the price to settle soon between 125p - 150p before moving on as we start hearing predatory rumours.
Middle Eastern interest in the shares should also start to come through soon, and I now expect a number of regulatory disclosures as a number of parties review their positions and take a stake / an increased stake. I also expect a number of Directors to now buy in, we must be out of a closed period now.