SoftBank is ‘unlikely’ to trigger option to buy stake in The Hut Group’s tech arm after share price slump, says a major City bank
Investment giant SoftBank is ‘unlikely’ to trigger its option to buy a big stake in The Hut Group’s technology division after a slump in the share price, a major City bank has said.
JPMorgan said the probability of the Japanese conglomerate buying 19.9 per cent of THG’s Ingenuity arm for the agreed price of $1.6billion (£1.2billion) has receded because the terms now value the business unit – one of three at the e-commerce group – at significantly more than the entire group.
THG said at the time that the deal values Ingenuity, the third and smallest of THG’s business divisions alongside Beauty and Health, at £4.7billion.
Turn off: JPMorgan said the probability of the Japanese conglomerate buying 19.9 per cent of THG’s Ingenuity arm for the agreed price has receded
Shares in THG have fallen 75 per cent from their January peak and it is now worth just £2.4billion.
But JPMorgan said in the note, circulated recently among its clients, that lingering hopes the option would be exercised at the current price were still a ‘positive’ for the shares until either party states otherwise. The bank’s analysts said that would ‘limit further downside from current levels’.
City sources have speculated that SoftBank, which owns the stake through its investment arm SB Management, may seek to renegotiate the option strike price unless the shares significantly recover by next year. One said: ‘It doesn’t add up. They could buy half the group for the same price as this would cost them.’
JPMorgan has cut its price target on THG to £2.36, making it the third broker to cut its forecast to below last September’s £5 float price.