Belfast Telegraph

View from Dublin: Mike Ashley should buy back Sports Direct

Sports Direct owner Mike Ashley saw his company’s shares fall sharply
Sports Direct owner Mike Ashley saw his company’s shares fall sharply

By Richard Curran

Sports Direct boss Mike Ashley should put an ad in a local Newcastle newspaper: "Auditor wanted for very large, reliable, transparent and solid sports retail chain." The publicly quoted company saw its share price tank after its auditor Grant Thornton decided not to continue in the role. This came after Sports Direct was hit with a €674m tax bill in Belgium.

Grant Thornton said it was not told about the tax bill until just before it was due to sign off on the accounts.

The company has just one month to find a new auditor and believes it can only be serviced by one of the Big Four. So far, it isn't having any luck landing one, with various firms citing conflicts of interest or other reasons for not taking on the new client.

In an unusual move, under British law, the business secretary has to impose an auditor on the firm if it cannot get one itself.

The wider reality here is that Sports Direct is not a suitable publicly listed company. Ashley owns 62% of it and has made some expensive mistakes with acquisitions and other very public errors.

This means he is making mistakes with shareholders' money - his company is 38% somebody else's.

The firm's shares fell to 214p last week, when they had been trading at 922p five years ago.

If Ashley believes so strongly in the company and the brand, he should take the firm private at these stock levels, buy out the other 38%, and do what he wants with his own money.

He would also shed all of these very "cumbersome" stock exchange rules.

  • Former AIB chief executive Bernard Byrne has a very strong case for saying to the Irish Government: "I told you so." Back in 2018, when AIB shares were trading at around €5.50, Mr Byrne suggested that it would be a good idea for the state to sell down its 71% shareholding in AIB further.

He suggested that the total value of cash received by the state from share sales, dividends and the cost of the guarantee, combined with the value its remaining 71% stake would have, equated to the €20.8bn the Government had sunk into the bank during the financial crisis.

It was a good time to get out. AIB shares at the time were trading at almost double their current level. Mr Byrne took the unusual step of advocating a further share sale publicly, which attracted the ire of Finance Minister Paschal Donohoe.

European bank shares have had a torrid time this year, and in an Irish context, AIB has taken a real pounding. Around €3.5bn has been wiped off its market capitalisation since January, which has reduced the value of the state's stake by around €2.5bn.

The value of the state's shareholding in Permanent TSB has plummeted around €215m, and its 15% of Bank of Ireland has fallen in value by around €270m.

But before jumping to the obvious conclusion that the Government has missed the boat on an AIB sell-off, a wider question has to be asked: Why did it want to keep the shareholding in the first place? And does it really need to sell at all?

Mr Byrne was looking at a purely financial or economic equation when he suggested that January 2018 was a good time to sell. He didn't have a crystal ball about the future, but could see an opportunity for the taxpayer.

Politics is more than economics. The Government was smarting from the publicity that banks had ripped people off once again through the tracker mortgage scandal, and that former state assets (held by Nama) had been sold too quickly and cheaply.

The opposition would have jumped all over Fine Gael if it had fully privatised AIB. The tracker mortgage scandal showed that banks and bankers still needed not only to be regulated, but controlled by shareholders.

So, there were alternative reasons for keeping the stake at the time. There is also the question of what the Government would have done with the proceeds. It has struggled to run up surpluses during an economic boom in recent years. It could have used some of the money to pay down debt. This might have looked good but the cost of borrowing for the state is near record lows.

Belfast Telegraph

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