Softbank’s $1.6bn investment in THG tech business falls through

THG has been dealt a $1.6bn (£1.3bn) blow as a high-profile investment with Softbank fell apart.

The Japanese conglomerate became a major investor in Matthew Moulding’s THG last year and it had the right, but not the obligation, to buy a 20pc stake in Ingenuity, its white label technology business, in exchange for $1.6bn. THG told investors yesterday the deal was terminated by mutual agreement, blaming the decision on harsh macroeconomic conditions.

The shares edged down before they recovered in afternoon trading.

Speculation has been mounting for months that Softbank, one of the world’s largest investors, would not exercise the option after a slump in the share price. The group, which was once valued at more than £8bn and owns Lookfantastic and Myprotein, is now worth £870m.

Investors have taken flight in recent months amid a tech sell-off and after concerns about THG’S business model and corporate governance, something the company has been seeking to rectify. Mr Moulding co-founded the company in 2004 as an online CD seller with John Gallemore. He previously said the float was a mistake and recently rejected several takeover approaches.

David Reynolds, at financial services company Davy, said: “In many ways it’s a very practical and expected outcome.

“What Softbank found themselves in, they were in a transaction where the valuation they set many months ago – $6.3bn – is now an irrelevance and it would have been commercial lunacy to pursue it. There may be dynamic within Softbank where their understanding of Ingenuity is more informed in July 2022 than it was 12 months ago, but that’s difficult to know.

“Ultimately, the valuation downside that we’ve seen in the broader tech sector is so material it would have been lunacy for them to proceed.”

It comes after Softbank’s decision to wind down SB Northstar, which was aimed at using the company’s excess cash to pick stocks. One of the conditions for Softbank to inject cash into Ingenuity, which is used by Nestle and Homebase, was for THG to carve it out from the rest of the business.