Investing.com — THG Plc’s (LON:) stock fell as the company on Friday said it plans to raise £95.4 million through an oversubscribed share placement, part of a broader strategy to simplify its business model by demerging its Ingenuity division.
At 4:13 am (0813 GMT), THG was trading 5.8% lower at £48.70.
The Manchester-based company in a stock exchange filing said it had successfully raised the funds by placing 194.7 million new shares at 49 pence per share—a 5.2% discount to its previous day’s closing price.
The new shares represent 14.6% of the existing stock. CEO Matthew Moulding himself led the fundraising effort, investing £10 million, while long-term institutional investors contributed roughly £50 million.
“We see this as a smart play, enabling investors to control their demerger distributions, leaving a listed RemainCo that will consist of two high quality, strategically-relevant, cash generative, global consumer businesses, and unlocking valuation upside,” said analysts at Jefferies in a note.
Frasers Group, which has an ongoing partnership with THG, also injected £10 million.
The fresh capital is intended to facilitate THG’s plan to separate its Ingenuity division, which offers technology and e-commerce services.
This move aligns with the company’s strategy to refocus on its core businesses in the beauty and nutrition sectors, where it aims to become a more cash-generative global consumer group.
The demerger of Ingenuity is expected to simplify THG’s operations, improving its cash flow, capital expenditures, and overall balance sheet.
“We remain positive on THG’s demerger plans, believing it will simplify the investment case, remove a material cash drain from the listed operation, and leave a RemainCo that consists of two high quality, strategically-relevant, cash generative, global consumer businesses,” Jefferies said.
However, the fundraising, which included a retail offer through PrimaryBid raising £5.4 million, did little to alleviate market concerns.
The company has faced increased scrutiny since its 2020 IPO, with critics questioning its valuation, governance structure, and the performance of its various divisions.
THG’s partnership with Frasers Group, announced earlier this year, includes collaborations on technology and e-commerce solutions, including integrating Frasers’ loyalty platform into THG’s operations.
“We see scope for a material upward re-rating,” Jefferies said.