The THG (LSE: THG) share price has plunged a staggering 75% since the company’s IPO earlier this year. The company has faced a wave of criticism from investors and analysts alike over the past few months. They have questioned everything from the group’s corporate governance to profit margins.
The organisation is trying to meet investor concerns. Unfortunately, it does not look as if the market will give the firm breathing space any time soon. This is igniting interest that THG could become a takeover target, or become the subject of a management buyout.
THG share price appeal
If one person knows more about THG than anyone else, it is its founder and CEO Matt Moulding.
Whenever I evaluate companies as investment opportunities, I always pay keen attention to management and founder comments. These people will always know far more about their businesses than outside investors, even if they are controversial characters.
In a recent interview with GQ magazine, Moulding struck an upbeat note about THG’s potential. He noted that the firm’s partnership with Japanese investment group Softbank will allow the organisation to “build a very, very big tech business“.
He wants to use Softbank’s backing to help take THG global. And the CEO is not interested in trying to meet the market’s short-term goals. Speaking to GQ, he said: “We’ve got cash in the bank, we generate loads of cash, it’s a massive business, things are in great shape.“
Moulding went on to add: “The plan is I’m just going to keep doing what I’m doing, I’m just going to trade through key peak trading period, smash our numbers like we’ve always been doing.”
He also criticised the market for focusing too much on THG’s complex structure without giving any credit to its operating performance. The CEO also noted that he would have avoided an IPO in the UK if he had another chance. He said US markets are more forgiving of complex tech companies.
Buyout on the cards?
These comments have given rise to speculation that Moulding could lead a management buyout of THG. A Softbank-backed buyout could also be on the cards. And if management is not interested, another big corporate buyer might be happy to step in and snap up the tech firm at a discounted value.
Of course, this is just speculation at this stage. No merger or buyout has been announced. Still, I think it is interesting to note Moulding’s views, both on the current healthy state of THG and the market.
And, considering his upbeat assessment of the company’s prospects, I would acquire a speculative position in the stock for my portfolio.
However, I have to remember that challenges, such as fierce competition in the e-commerce segment and continued market scepticism, may continue to hurt the business.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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