Shares in Hut Group have jumped in value by a quarter at the start of trading on their first day on the stock market in a signal of strong investor demand for the British e-commerce company.
The Manchester-based business announced at the beginning of the month that it would float its shares on the London Stock Exchange, with an offer price of 500p per share that valued it at £4.5bn.
In its first day of trading on Wednesday shares changed hands for as much as 658p, 32% above the price of the initial public offering, taking its value as high as £5.9bn. The price then retreated to 625p at the close, up 25% for the day and valuing the business at £5.6bn.
The biggest London stock market debut since 2013 has netted the company £920m, while shareholders led by the group’s founder, Matthew Moulding, and a group of retail veterans, will share gross proceeds of £961m. Moulding’s 17% shareholding in the company is now worth £950m.
The former Tesco boss Terry Leahy is cashing in £17m of shares, the former Matalan and Asda boss Angus Monro £4.6m and the former Debenhams boss Terry Green £6.2m, with all three retaining multimillion-pound stakes.
The Scottish retail entrepreneur Tom Hunter, a former House of Fraser investor who made millions from selling the Sports Division chain to the rival JJB Sports in the 1990s, is the biggest beneficiary among the Hut Group’s retail veteran backers, selling £52.5m of shares and retaining a stake worth more than £95m.
Hunter said the majority of the proceeds from the shares sold on Wednesday would go to the Hunter Foundation, which backs charitable efforts including supporting, entrepreneurship, children and disadvantaged young people.
Moulding has previously said the timing of the float was prompted by private equity backers wanting to sell their investments. The private equity firm KKR has sold all its shares, worth almost £450m, during the flotation.
A fund linked to the Beano owner, DC Thomson, has also sold £1.5m of shares and retains a near £5m stake. Other investors include the investment funds BlackRock, Merian Global Investors and Balderton Capital, which also invested in Wonga and Betfair.
The valuation propelled Hut Group into the ranks of Britain’s most valuable public companies. However, it does not qualify for the FTSE 100 index because of an unusual governance structure that prevented it from gaining a premium listing.
Moulding has continued as joint chairman and chief executive of the company, and will retain a “founder’s share”, meaning he will retain control for three years. Moulding has defended the arrangement, which is more common in the US than in the UK, saying he wanted to protect against a hostile takeover.
He is also in line for large bonus payouts of as much as £700m if Hut Group’s market value rises to £7.25bn in three years.
Moulding also sold part of his shareholding in the flotation via a Guernsey-based investment vehicle to fund the acquisition of property from the group. Moulding will then charge the group £19m in rent per year.
Moulding founded Hut Group in 2004, gradually moving the business from selling CDs tax free online to running websites for other retailers such as Asda, Tesco and WH Smith. The Hut Group provides technology for brands such as Nestlé, Unilever and Danone to sell direct to consumers.
However, the majority of its £1.1bn revenues in 2019 still came from its own direct-to-consumer sales, through websites including Lookfantastic, Glossybox and Zavvi as well as beauty brands such as Espa and Illamasqua and the sports nutrition company Myprotein.
It employs about 7,000 people around the world and has just built a new $1bn campus near Manchester airport, which it says has room for 10,000.
The company previously planned to float in 2011 but it cancelled the share offering because of a fraud, according to court documents reported by the Guardian.
