After THG’s (THG) share price began to slide last September, Matt Moulding announced that he would be surrendering his “special share” this year. He founded THG as The Hut in 2004, and he both chairs and manages the group as its chief executive. The special share was designed specifically for him. It lets him veto any unwanted takeover bid.
THG is best known for selling make-up and protein powder to image-conscious consumers, and when it floated on London’s main market in September 2020, it was the largest IPO since 2013. At £5.6bn, the group was large enough to qualify for the FTSE 100, except that the major FTSE indices take only premium-listed shares, and this was denied to THG because of its governance. Some institutions, such as passive funds, can only buy premium shares, but for the first 12 months after it listed, this hardly seemed to bother THG’s investors. Its share price traded above its launch price. Then came the slide. The directors clearly thought that a premium listing might help to peg it – so that special share had to go.
Ironically, a couple of months later, in December 2021, the listing rules changed. Companies that float with dual-class shares now qualify for a premium listing provided that their special shares have no more than 20 times the voting rights of their ordinary shares. Only a tenth of their shares need to be offered to the public (down from the minimum of a quarter), and companies have to be worth £30m or more. Why the change? The idea is that more private companies will now come to market at an earlier stage than before. The view was that London was losing out because founders worried about losing control of their companies. Large technology companies seemed to prefer Euronext in Amsterdam, the largest EU rival to London, or stock exchanges in the US, Hong Kong and Singapore, all of whom welcome dual-class shares. Between 2015 and 2020, London attracted only 5 per cent of the worldwide IPOs.