From Huts to Mansions: CEO and crucial employees to receive huge payday
November 30, 2020
2 min read
What's going on here?
After a successful initial public offering on the London Stock Exchange, CEO of The Hut Group (THG) is set to receive a huge bonus payment.
What does this mean?
THG is a British e-commerce company that recently made an initial public offering (IPO) on the LSE – read our article on that here. THG provides an e-commerce platform that facilitates direct-to-consumer sales for over one hundred international websites. Think Ocado, or if you are particularly ambitious, as the CEO most certainly is, Amazon. Ingenuity is THG’s fastest growing division, licensed by the likes of Nestlé, Coca-Cola and Unilever to manage their own online retail operations.
The CEO and founder, Matthew Moulding, is closely tied to the success of the firm. Moulding will receive a pay-out of £830 million pounds after the company hit post-IPO valuation targets. Moulding will receive further pay-outs if the company hits a valuation target of 7.25 billion before winter 2022.
What's the big picture effect?
This story is another example in the growing success for technology-powered companies during the pandemic. Despite failing to provide consistent yearly profits, the company’s valuation reflects the appeal of the Ingenuity division. Yet, a recent drop in technology shares after news of highly effective vaccines does not bode well for THG’s immediate future.
Moreover, not all are on board with the hype. Analysts at Bernstein highlighted corporate governance concerns due to a conflict of interest at the management level. Moulding’s role as “Chief executive, executive chairman, landlord (he is due to receive £19 million pounds a year from THG as rent) and 25 percent shareholder,” were particularly concerning. Armed with a so-called ‘golden-share’, Moulding can also single-handedly prevent any takeover attempts of the company. This should worry investors, but the appeal of future profits is overwhelming. Moulding’s pay-out has also resulted in renewed claims for higher taxes on high net-worth individuals. This comes at a time during which Rishi Sunak investigates capital gains tax reforms. Post-Brexit, the UK must figure out the right balance between taxing high net worth individuals and keeping these wealth generators from completely leaving.
Furthermore, this is also a story reflecting the growing trend of high net worth entrepreneurs with large businesses that require both private client and corporate services. While THG received legal advice during the IPO; Moulding will have received private client advice on managing his wealth and setting up the special purpose vehicle that was used to purchase the property from THG. Predictions of this trend served as the motivator for a firm such as Macfarlanes to retain their private client practice in addition to their corporate practice. This is not typical of the other larger UK corporate law firms. With that in mind – to what extent do you think this is an effective business strategy for a law firm?
Report written by Andri Boda
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