THG’s shares may have fallen over the past year and dropped again on news of its plans for Ingenuity and its fundraise on Friday, but analysts think the deal is a good one.

The company is to demerge its Ingenuity unit — the tech business that offers full e-commerce services for third-party brands — into a private company (IngenuityCo) after ongoing pressure from shareholders.

It also announced a £75 million fundraise via a share placing that was oversubscribed and actually raised £95 million+. The money will support its business plans. 

In a note, analysts at Jefferies said this is the right thing to do and gave THG shares a Buy rating.

They said they “see this as a smart play” and that the continuing THG business “will be an attractive asset. We remain positive on THG’s demerger plans, believing it will simplify the investment case, remove a material cash drain from the listed operation, and leave a RemainCo that consists of two high quality, strategically-relevant, cash generative, global consumer businesses”. 

Those two businesses are the Beauty operation that’s dominated by its Lookfantastic retailer, and the Nutrition business.

Interestingly, it also emerged that Frasers Group made a strategic investment of £10 million in THG as part of the fundraise. The two companies already had a relationship after signing a strategic partnership deal back in June.