Mike Ashley’s Sports Direct Group PLC (LON:SPD) has again raised its indirect holding in Debenhams PLC (LON:DEB), taking its interest in the department stores operator to over 13%.
In a notification of major interests in shares, Debenhams disclosed Sports Direct now has a holding of 2.88% in the group held via contracts for differences (CFDs), in addition to a put option it holds over a 10.5% stake, giving an overall holding of 13.38%.
Earlier this week, Debenhams revealed that Sports Directs stake had risen to 11.06%, with a CFD holding of 0.56% in addition to the put option.
The move has fuel speculation about the motives of the billionaire retail entrepreneur, with Sports Direct in the past having simply stated that its intention is to be !a supportive stakeholder in Debenhams and to create value in the interests of both Sports Direct’s and Debenhams’ shareholders.”
Sports Direct’s put-option deal with Goldman Sachs relating to a 10.5% position in Debenhams taken out in January 2015 that originally lasted for one year but was extended for another year last May.
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The put option is effectively a bet that Debenhams’s share price will rally as it gives the owner the right to sell the shares at a prearranged fixed price.
If the share price is below the agreed exercise price when the contract expires, Sports Direct would have to buy the stake – the equivalent of 128.9m shares – at that price or pay the bank the difference.
If the share price rises above the exercise price, Sports Direct receives the premium – a profit for Ashley and the company.
The CFD holding also allows Sports Direct to take advantage if rises and falls in Debenhams share price for a small initial deposit without actually buying the stock.
In mid morning trading today, Debenhams shares were 0.5%, or 0.25p lower at 54.4p.
Sports Directs shares were down 0.1%, or 0.3p at 293.6p.