The Hut hit by record blitz of short-selling

City traders bet £110million on ANOTHER fall in tech giant’s shares after devastating crash

BELEAGUERED tech giant THG has been dealt a fresh blow by a record surge in City traders betting on a fall in its share price, The Mail on Sunday can reveal.

The number of contracts out on loan – so-called short positions which controversially allow investors to profit from a drop in the share price – have doubled in the past fortnight, hitting a new high.

The value of shares held by short-sellers is now £110million.

The sustained short attacks are threatening to derail a recovery in the share price. They come despite persistent rumours that the company’s billionaire founder Matthew Moulding, also its largest shareholder, may seek to take it private. Moulding, 49, chairman and chief executive of THG, complained in October that shorters were largely to blame for the plummeting share price.

But THG – known as The Hut – has also been facing pressure from shareholders since a blockbuster £5.4billion float failed to deliver.

Investors have been spooked by concerns over Moulding’s powerful role as well as by the growth prospects for THG’s much vaunted Ingenuity e-commerce division.

The shares initially rocketed after the float in September 2019, hitting a £7.99 peak last January.

But in September, they plummeted below the £5 float price amid warnings from some City researchers who alleged there had been myriad strategic and corporate issues. The shares closed at £2.29 on Friday.

The Mail on Sunday reported in September that secretive research house The Analyst had recommended that City traders take short positions. Growth prospects at Ingenuity were described as ‘unrealistic’. The Analyst reversed that recommendation on December 6 shortly before the shares hit a low of £1.67.

But traders taking short-selling contracts, a practice dominated by hedge funds, appear to have shrugged off the advice and the bid rumours despite a bounce in the price.

By last Wednesday, the number of short positions had doubled in just 16 days to 4 per cent of the stock, according to data from research firm IHS Markit for The Mail on Sunday. Company insiders said it rose as high as 5.7 per cent last week.

The number held in such positions is currently three times greater than when Moulding complained about short trading activity in October.

The majority of THG is owned by Moulding and his associates so the slice of shares being shorted represents a larger portion of those that are available to trade on the open market.

That means the level of short positions has a bigger impact on the share price than if the shares were more freely traded.

Short-sellers are often criticised, but they have recently been lauded for spotting fundamental flaws in stock marketlisted companies, as well as concerns about company culture and even fraud. The Analyst is credited as the whistleblower that sounded the alarm in 2014 over Wirecard, which in 2019 filed for insolvency with debts of more than £3 billion.

The research house declared shares in Carillion and Debenhams were worthless well ahead of their collapse and last year it forecast shares in Deliveroo, then at £2.47, would fall 40 per cent. The shares closed at £2.09 on Friday – just over half of the £3.90 float price in March.

One City source said The Analyst had changed its recommendation on THG’s shares because ‘there wasn’t much further they could go [down]’. The source added: ‘They believe there’s a good underlying business there, but just think it has been overhyped.’

In November, Moulding said the slump in the share price and ensuing criticism had been ‘a sh***y time’ and he branded the flotation a ‘mistake’. Last week, financial information service Bloomberg reported that the company had held internal discussions about selling off its prize health nutrition or beauty assets or even exiting the stock market through a private buyout.

THG has been criticised over its founder’s dual role at the firm and Moulding has faced calls to pay back an £830million sharebased bonus. The company has said it will seek a new chair and that Moulding will relinquish his ‘golden share’ which gives him the power to veto any takeover.

THG’s Beauty and Nutrition divisions – which include websites Myprotein and Lookfantastic – account for more than 80 per cent of sales, while Ingenuity accounts for just 9 per cent.