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London Markets: SoftBank-backed THG reels further after saying it can’t explain stock-price decline

THG shares failed to bounce back Wednesday after the internet retailer said it couldn’t explain why the stock dropped so heavily during its capital markets day.

THG
THG,
-5.61%
,
which sells beauty and nutrition products online, slipped 3% after a 35% decline on Tuesday. THG said it “notes the fall in the share price yesterday following the Capital Market Event, and confirms that it knows of no notifiable reason for the material share price movement, and that no material new information was disclosed at the event.”

Analysts said THG didn’t satisfy investor expectations to explain its THG Ingenuity unit, which helps third parties such as Burt’s Bees, Homebase and Nestle with technology and fulfilment. SoftBank
9984,
-1.07%

has an option to buy about a fifth of Ingenuity for $1.6 billion. At that valuation, Ingenuity is worth more than THG as a whole, which as of Tuesday carried a market cap of £4.2 billion ($5.7 billion), according to FactSet.

CFO Steven Whitehead said they have a “high degree of certainty” that SoftBank will exercise the option in the first half of next year, according to a transcript.

JPMorgan Cazenove analysts led by Marcus Diebel said executives didn’t explain the structure and timing of the option in more detail, and didn’t provide guidance on cash flow and working capital movements in the second half of this year.

Analysts at Davy Research were more scathing, and said the market now values Ingenuity at “close to zero.”

CEO Matthew Moulding said the company is a target of a “short attack,” a claim that got criticized by former London Stock Exchange CEO Xavier Rolet.

The FTSE 100
UKX,
-0.08%

slipped 0.1% as commodity producers including Rio Tinto
RIO,
-1.99%

and BP
BP,
-1.77%

dropped.

Barratt Developments
BDEV,
+5.83%

rallied after the home builder said customer demand remains strong, an update that helped rivals Taylor Wimpey
TW,
+4.25%

and Persimmon
PSN,
+3.51%
.

Man Group
EMG,
+7.84%

jumped 8% as the hedge-fund operator reported $5.3 billion in inflows during the third quarter.

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