How to beat the shorts: THG edition
Matt Moulding’s empire warns on margins.
THG, or the artist formerly known as the The Hut Group, had a 2021 to forget.
The £2bn protein-powder-slash-beauty-retailer-slash-wannabe-e-commerce-platform-provider, led by sun’s-out-guns-out chief executive Matt Moulding, saw its stock crater by 71 per cent over the course of the year as concerns over its governance, its Shopify-competitor-to-be arm Ingenuity, its relationship with Softbank, and its gyrating strategic direction caused shareholders to vote with their feet.
So what do you do if your business is struggling to get its business case across to the market? Blame short-sellers of course.
And so it was with Mr Moulding who, at a GQ event held at yuppie nature reserve Soho Farmhouse in November, laid into this evil cabal of investors.
From The Times:
Moulding said THG shares had suffered from a “pretty aggressive short attack ... You wouldn’t rob banks any more, you’d just do short attacks, you can get away with it, it’s legal. And essentially, it cuts across a few industries from media, investment banks, fund managers, hedge funds, etc.“They come together. They’re not technically or legally together, but essentially operate in tandem.”
Ignoring the fact that attacks on short-sellers from chief executives have a storied history of being a reliable indicator to dump a stock, there is really only one way to get revenge against the bears: prove them wrong.
Perhaps the best example of this is Netflix chief Reed Hastings’ response to a note from short-seller Whitney Tilson way back in 2010. Writing on stock research site Seeking Alpha, he gently rebuffed Tilson’s points before — and this is the important part — delivering exceptional operating results at the company. Netflix went on to be one of the best performing US stocks of the decade, with a return of 4,135 per cent.
So, THG investors might have been hoping that the company’s fourth quarter results, published Tuesday, would bring some early signs of recovery.
Womp womp, from the FT:
THG has said profit margins for 2021 will miss analysts’ forecasts but the UK ecommerce group expects them to recover this year.Margins before interest, tax, depreciation and amortisation will be 7.4 to 7.7 per cent against market expectations of around 7.9 per cent, largely because of exchange-rate variations, the Manchester-based group said on Tuesday.It added that margins should improve throughout 2022 as investment in automation and new client wins offset inflationary pressure, though this will be weighted towards the second half of the year.
On the news, the shares are down 8.8 per cent at pixel time, to £1.69.
Let’s just hope the investor conference call, which kicked off just under an hour ago at the time of writing, goes better than the one in October.