Shares in The Hut Group soared by over 30% on Wednesday morning, as the UK-based online retailer made its debut on the London Stock Exchange.
The Hut Group sold 376 million shares at 500 pence each — 25% above the price of the initial public offering price — to raise £1.88bn ($2.43bn), valuing the e-commerce company at £5.4bn ($6.96bn).
This makes the Hut Group the largest UK listing since 2013. The IPO has netted £920m for the company. Shareholders, led by group founder, Matthew Moulding, will share gross proceeds of £961m.
“As the biggest IPO since Royal Mail was launched back in 2013 The Hut Group will be closely scrutinised in terms of not only early demand, but also the sustainability of the business model,” said analyst Michael Hewson at CMC Markets. “Time will tell as to whether the valuation is a solid one, or whether KKR [the largest shareholder] has made the right move in selling out of their entire stake.”
“As noted when the filing was lodged, after a considerable ramp in tech valuations this year — eg Ocado +100% in the last 12 months — this IPO looked like a well-timed move, at least on the part of the founder who is due a bumper £700m pay-out should all go well, whilst still remaining very much in control of the business,” said Neil Wilson, chief markets analyst at Markets.com.
The Hut Group, which was founded in 2004 in Manchester, makes most of its money through beauty and fitness. It owns Europe’s largest online beauty retailer Lookfantastic, as well as Skinstore and Mankind, and sells nutrition supplements under the Myprotein brand. It also owns e-commerce platform Ingenuity, which it licences out to third parties.
“Much of the excitement around the stock surrounds its Ingenuity e-commerce fulfilment platform,” said Russ Mould, investment director at AJ Bell in a note. “In the same way Ocado’s online groceries solution is sold to third party supermarkets — The Hut is signing up the likes of Nestle (NESN.SW) and Procter & Gamble (PG) to Ingenuity and this is seen as the big growth opportunity for the business.”
Sales across the group grew 24.5% last year to £1.1bn last year and adjusted earnings rose 9.8% to £111.3m. The company said the COVID-19 pandemic has accelerated growth, with sales up almost 36% in the first six months of 2020.