Chrysalis and Jupiter losses mount as THG crashes after chief attacks short sellers

The e-commerce group's shares lost a third of their value after a presentation to reassure investors backfired, dealing a blow to highly-rated Jupiter funds.

THG (THG) shares have shed well over a third of their value in less than 24 hours after a presentation to reassure investors about the e-commerce group’s prospects backfired spectacularly, dealing a blow to Chrysalis Investments (CHRY ) and other Jupiter funds with big stakes.

Chief executive and co-founder Matt Moulding hit out at short sellers at a capital market’s day yesterday, widely seen as a mission to justify the worth of the group’s Ingenuity technology unit and address negative perceptions after the shares had slid throughout this year.

Instead, the shares plunged as the afternoon event proved a bust, eventually closing down 35% on Tuesday. Falls continued as markets opened today, with the stock down a further 3.1% to 276p at 11am amid volatile trading.  

‘The City has totally lost confidence in this company and its founder,’ said analyst Neil Wilson.   

Formerly known as The Hut Group, the owner of Myprotein and a diverse suite of beauty and other brands had been an investor darling when it floated a year ago, but challenges have mounted this year amid a wider slowdown in the e-commerce sector with supply chain and other issues biting.

Pressure grew after a recent ‘short’ note written by The Analyst, a subscription-based research house run by former Fidelity analyst Mark Hiley, which was an early critic of fraudulent German payments company Wirecard.

Emerging over the weekend, the report recommended investors bet against the stock, particularly criticising the inflated prospects of Ingenuity, a white label platform helping other retailers run their operations which had been crucial in attracting Japanese group SoftBank’s investment earlier this year.

‘I think there was a lot of anticipation given the recent short note but the capital markets day could not fully address investors’ concerns. The lack of visibility is becoming an issue,’ said Shore Capital analyst Eleonora Dani.

Having floated at 500p in September 2020, the shares now stand at barely a third of an 800p peak at the beginning of this year.

THG’s tumble also dragged down Chrysalis, which fell 2.6%, or 6p, to 225p today, building on similar losses the day before. That comes after considerable air had already come out of the shares of the private and early-stage company investment vehicle in recent weeks, putting them down more than 15% over a month, though investors at launch three years ago have still comfortably doubled their money after a string of other successes.

THG made up 7.7% of Chrysalis’s portfolio at the end of June, having taken profits around the turn of the year.

Open-ended funds also run by Jupiter’s small and mid caps team, of which Chrysalis managers Richard Watts (pictured) and Nick Williamson are part, have also been hit as THG and fast fashion online retailer Boohoo (BOO) have pulled back sharply.

Watts’ £3.3bn Jupiter UK Mid Cap fund, which had 6.2% in THG at the end of August, has lost 5% over three months, about 6% behind the wider UK market and placing in the bottom quarter of its sector peers. The timing of funds pricing means the latest falls are not included.

Jupiter as a group is the sixth biggest holder of THG, owning around 6.3% of the shares, according to Refinitiv data for the end of March. The stock is also a significant 3% position in Daniel Nickols’ £1.4bn UK Smaller Companies fund.

Other UK-based funds with significant weightings in the stock include the BMO UK High Income (BHI ) investment trust, whose shares were little changed, and the firm’s Select European Equity fund. Both run by Philip Webster, they had 4.4% and 2.4% positions respectively at the end of August according to Morningstar data.

Chrysalis’s corporate broker Numis calculated that, following recent weakness, yesterday’s tumble in THG shares would have taken a further 1.9% out of the portfolio net asset value (NAV).

Allowing for movements in all quoted holdings, including Wise (WISE), and performance fees, analyst Andrew Rees estimated the NAV stood at 226.9p per share, a 2% premium to last night closing price of 231p.

Rees said struggles at a high-profile unquoted holding – which also became its first stock – were ‘clearly disappointing’.

‘Given Chrysalis’ focus on high-growth businesses we never expected it to be always be plain sailing,’ he said, pointing out small companies lender Growth Street had already been wound down.

‘We would expect the situation with THG to rumble on for some time, and may add volatility to the NAV, albeit we estimate THG is now just a 3.6% position.’

THG, which has a trading update due on 26 October, told the market this morning there was ‘no notifiable reason’ for the scale of its share price fall.  

Jupiter declined to comment.

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