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Sports Direct converts its Debenhams stake to put option – and increases its exposure to 12.7 per cent
Mike Ashley has done it again. He's converted his standard investment (or “investment” as we call it) in Debenhams into a put option, increasing his exposure to the department store along the way.
The move, which is actually taking place through Ashley's retail giant Sports Direct, involves disposing of the 4.6 per cent stake taken early last month and entering a put option, worth 6.1 per cent, instead.
In total, Sports Direct's exposure to the business, which has been struggling to turn around falling sales and profits, has risen to 12.7 per cent.
The put option means that if Debenhams' share price goes below the exercise price, or strike price, at the point when the option expires, Sports Direct will lose out. If it goes up, Sports Direct gets a premium and has no further obligations.
Just what exactly the strike price is, however, has not been revealed.
The retailer has transferred collateral to cover its obligations, though this can increase or decrease depending on Debenhams' share price movements. The maximum exposure is £46m.
The market announcement added: “Sports Direct continues to work together with Debenhams and looks forward to building a long-term relationship.”
This isn't the first time Ashley has taken this course of action – in fact it's exactly what he did with the first punt he took on Debenhams back in January.
Sports Direct's share price was broadly flat in afternoon trading, while Debenhams' had risen four per cent.