Jolly good for the London Stock Exchange that after a long drought it finally has a £5.4billion float to celebrate in the shape of the online beauty and health group, The Hut.
It is a pity then that the 264-page prospectus, posted on the company’s website last evening, poses as many questions as it answers.
As much of a ‘gem’ as the enterprise may be, as described by independent broker Liberum, founder chairman and chief executive Matt Moulding has unsheathed a governance nightmare.
In order to secure ownership of properties including the Spa Resort in Cheshire, founder chairman and chief exec Matt Moulding (pictured) has taken out a £100m loan from Barclays
Not only will he have autocratic powers, he has also leveraged himself and his family up to the hilt.
In order to secure ownership of the properties, including the luxury Spa Resort in Cheshire, gorgeous Matt, family and associates have taken out a £100million loan from Barclays. In the unlikely event that The Hut were to be blown over, Barclays could be the lucky holders of 30 per cent of the equity.
The sell-off is going to make some very rich people even more wealthy. My old friend Sir Terry Leahy of Tesco fame has a share stake worth £85million, on top of money he earned when retailer B&M joined the public markets.
One of the great puzzles of The Hut prospectus is why so many of the Square Mile’s golden elite have been prepared to trample over London’s reputation as the world’s leader on corporate governance.
The long list of names on the prospectus includes such illustrious and trusted as Rothschild, blue blooded JP Morgan Cazenove and Goldman Sachs.
Together, they and the other advisers look set to scoop £38million of fees.
By the standards of City fat cattery, this may not be a big number, which makes it even more egregious.
The shortcomings of the way The Hut intends to govern itself have been evident from the moment the IPO was announced.
Prospective investors can finally see the problems in black and white. Moulding is flouting governance codes by being chief executive and executive chairman.
He will also will retain a special share, which is effectively a self-destruction button for shareholder democracy because it will mean that he has the power to defeat any resolution. It could also stymie deal-making because the founder would have a veto over unwanted transactions.
One cannot blame the LSE for wanting to host this float rather than see it migrate to the Nasdaq.
But a consequence of the planned free float being restricted to just 20 per cent of the shares, breaching the 25 per cent listing rule enforced by the Financial Conduct Authority, is that The Hut will be a standard, rather than premium, stock.
This might all seem technical, but it means that the group will be excluded from the major FTSE indexes, which in turn will mean that it cannot be part of any of the tracker funds that follow the FTSE.
The lack of any recognisable governance is unlikely to make it a favourite of ethical investors either.
The whole purpose of UK governance is to ensure over-powerful bosses do not run roughshod over the interests of other stakeholders. The prospectus seeks to claim that The Hut is doing everyone a huge favour by adopting powerful audit and pay committees when it is not obliged to under standard listing procedures.
That argument might hold water if the non-executives were credible and independent. They either have served too long or, like senior non-executive Zillah Byng-Thorne, are over-boarded and provided previous consulting services.
The chairman of the remuneration committee is private equity princeling Dominic Murphy who through his previous role as a financier to The Hut has a stake worth an estimated £50million. This is like asking the fox to stand guard inside the chicken coop.
There is a pledge of a new non-executive to come to provide a counterweight to a deeply unimpressive bunch. But only a truly desperate candidate would fancy being a lone voice among the cult of Matt.
It would be nice to think that The Hut, with its proprietary technology, own-branded protein products and deals with some of the world’s top beauty brands, is going to be a great UK success story – the next Ocado or something better.
Failure to control the exuberance of a boss who has contrived to be a landlord as well the master of all the levers of power is deeply disturbing.
It endangers confidence in the public markets.