THG Shares Soar After $2.4 Billion IPO to Ride Online Boom

(Bloomberg) -- THG Holdings Ltd.’s shares surged as much as 32% after the online shopping emporium raised 1.88 billion pounds ($2.4 billion) in a London initial public offering, cashing in on consumers turning to digital retail during the coronavirus pandemic.

The stock was trading up 26% at 631.9 pence at 15:15 p.m. in London from the fixed IPO price of 500 pence. The sale is the biggest float on the London Stock Exchange since Allied Irish Banks Plc’s $3.8 billion offering in June 2017, according to data compiled by Bloomberg.

Shares opened up 20% on the issue price, making it the best debut in London for an IPO worth more than $100 million since Codemasters Group Holdings Plc’s 24% pop in May 2018, the data show.

THG is a rare U.K. tech offering and is being perceived as a “hot stock” because of its technology platform that enables it to offer solutions for big, fast-moving consumer goods companies, rather than for its online retail business, said Colin McLean, chief investment officer at SVM Asset Management.

McLean’s investment firm participated in the offering and received 5% of its initial order due to high demand for the company’s shares in the IPO, a vast chunk of which had already been committed beforehand, he said.

There was “very strong interest from technology investors around the world,” said Phil Drury, head of banking, capital markets and advisory for Europe, the Middle East and Africa at Citigroup Inc., a joint global coordinator on the deal alongside Barclays Plc, Goldman Sachs Group Inc. and JPMorgan Chase & Co.

THG sold 920 million pounds of new stock, while existing holders unloaded 961 million pounds of shares, the company said in a statement Wednesday. The sellers include private equity firm KKR & Co., which exited its investment, and retail moguls Terry Leahy, Tesco Plc’s former chief executive, and ex-Matalan Plc head Angus Monro.

The IPO, which values THG at 5.4 billion pounds, has made its Chief Executive Officer Matthew Moulding a billionaire. Moulding, who retains a 25.1% stake, is also getting a special share that will give him power to veto any hostile takeover attempt for three years, a defense he said he deemed necessary after receiving unwanted takeover advances. The company changed its name from The Hut Group Ltd. just before the IPO.

Moulding, who will be both CEO and chairman, also stands to make about 600 million pounds if the company’s equity value exceeds 7.25 billion pounds by the end of 2022. THG transferred ownership of some warehouses, two boutique hotels and a country club and spa to the entrepreneur before the float, according to the IPO prospectus.

More Tech Listings

“We will see a wave of growth-oriented IPOs in technology and health care over the next two to four quarters,” Drury said. “Covid has accelerated investor interest in both sectors, including alternative ways to access, such as SPACs.”

IPOs in the tech sector have been sorely lacking in Europe, but THG’s successful debut is spurring hopes of more offerings. Its success may also entice more companies to stay close to home, rather than going to the U.S. market like Swedish streaming service Spotify Technology SA and U.K.-based retail technology group Farfetch Ltd.

“Certain tech and other high-growth companies that were considering listing over the next 18 months are contemplating accelerating their plans,” said Barry Meyers, JPMorgan’s head of U.K. equity capital markets. THG shows that attractive valuations are possible in Europe, and tech companies in the region “are now likely to think very carefully when deciding between London and the U.S. as listing locations,” he said.

Lockdown Winner

The accelerated shift from brick-and-mortar stores to online shopping during lockdowns has been pronounced in the U.K., an early leader in digital sales over the past several years to keep pace with rapidly changing consumer behaviors.

Manchester, England-based THG operates websites including myprotein.com and Coggles.com that sell beauty and nutrition products and is seen as one of the country’s biggest digital success stories. Starting out as a white-label provider of e-commerce services in 2004, it now works with global brand owners such as Nestle SA and Procter & Gamble Co.

THG’s share performance on listing “demonstrates the appetite for pure-play online companies in the U.K. market, with very few listed peers offering a similarly fully direct-to-consumer model,” Bloomberg Intelligence’s Maxime Boucher and Charles Allen wrote. “Yet, it may face near-term challenges past the pandemic boost to increase sales 25% a year,” they said.

Less than 20 minutes after it started taking orders, the IPO had enough demand for all the shares on offer, Meyers said. The level of demand on this listing demonstrates that the market is deep enough to support even larger deals, he said.

Deep-pocketed funds including BlackRock Inc., Henderson Global Investors Ltd. and Qatar Investment Authority had already taken up 615 million pounds of the IPO before it was opened up to the market. The offering consisted of 376.3 million shares in total, THG said Wednesday.

HSBC Holdings Plc, Jefferies Group LLC and Numis Corp. were bookrunners on the offering. Rothschild & Co was the financial adviser.

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