THG, an online retailer which also licenses its technology platform to other businesses, has been identified by the press as a
The IPO of THG will be the second largest IPO in
- THG has decided to apply for admission to the standard listing segment of the
FCA's Official List (the Standard Segment), rather thanLondon's gold standard listing regime - the premium listing segment of theFCA's Official List (the Premium Segment); and -
THG's co-founder,
Matthew Moulding , will acquire a “special share” on IPO which will give him the power, for a limited period of time, to pass or block any shareholder resolution should there be a change of control of THG.2
In a previous alert memorandum3, we considered reports that the
The novel structure of THG's IPO may bring into focus again the question of whether or not the Premium Segment should cater for dual-class structures, and may renew the significant debate in recent years between those who consider the one-share, one-vote principle as the bedrock of good corporate governance and those who advocate the benefits of insulating founders and entrepreneurs from increasingly short-term public market forces.
Special share
As described in THG's IPO prospectus (the Prospectus), the special share referred to above which will be acquired by THG's co-founder,
The scope and operation of this special share (or founder share) falls short of a full dual-class structure similar to those of many
Standard Segment vs Premium Segment
Another notable feature is THG's decision to list on the Standard Segment (rather than the Premium Segment). This has a number of implications.
First, only companies whose shares are admitted to the Premium Segment are eligible for inclusion in the FTSE
Second, by virtue of THG's ineligibility for the
Third, as we explained in our previous alert memorandum, the
Fourth, the continuing obligations to which a company admitted to the Standard Segment is subject are significantly less onerous (when compared with the Premium Segment): for example, the provisions of the Listing Rules relating to significant transactions and related party transactions only apply to companies admitted to the Premium Segment, which may be of particular relevance given THG has historically been highly acquisitive and, as described briefly below, Moulding will own a large proportion of the real estate used or occupied by the THG group. In addition, only companies admitted to the Premium Segment are required to “comply or explain” against the
Moulding as executive chairman
One of the requirements of the
As set out in the Prospectus, Moulding will remain as THG's executive chairman and chief executive officer post-IPO.8 While the
Moulding's compensation package
Certain options that have been awarded to Moulding and other members of THG's management team will vest based on the market capitalisation of THG as at
If all of Moulding's options vest in full, he would (assuming no further shares were issued or sold following the IPO) hold approximately 25% of THG's ordinary shares.9
THG's property holdings
Prior to THG's IPO, it is intended that a large proportion of THG's property holdings are demerged and distributed to a new entity owned and controlled by Moulding. THG will continue to use or occupy these properties pursuant to arm's length leases entered into between the relevant lessors and lessees.10
Premium Segment and the return of the founder share to the
The THG governance structure appears to give Moulding a significant degree of control over THG and its business.
Initial press reports indicated that this may have caused concern for certain investors.
Notwithstanding, five cornerstone investors made significant commitments to the THG IPO (worth approximately Ł615 million in aggregate)11. In addition, press reports indicate that shares in THG soared nearly a third on their debut to the
In any event, given that THG will be one of the larger
Footnotes
1 See THG's pricing announcement dated
2 The terms of the “special share” are summarised in the section entitled “The Special Share” in Part X of the THG's IPO prospectus, which was published on
3 See “
4 See section entitled “The Special Share” in Part X of the Prospectus.
5 See the article entitled “
6 See section 4 of the Ground Rules for the FTSE
7 See Provision 9 of The
8 See Part III of the Prospectus.
9 See section entitled “
10 See section entitled “Propco Reorganisation” in Part X of the Prospectus.
11 See section entitled “Material Contracts” in Part IX of the Prospectus.
12 See the article entitled “
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