Sports Direct sprints higher on share buyback flip-flop

28th Jul 2016 10:08

(ShareCast News) - Having played down the prospect earlier in the month, Sports Direct has decided to try and boost its waning share price with a proposed £90m buyback of around 5% of its shares, which it hopes to increase later in the year.The FTSE 250 company said its broker Citigroup would buy up to a maximum of 29.9m shares for a maximum of £89.77m up until its annual shareholder meeting on 7 September, when it will ask for permission to further extend the buyback.Three weeks ago at meetings around the release of preliminary results, managing director Dave Forsey played down the chances of a share buyback, but he and founder Mike Ashley have made the move with the share price having sunk almost a third from above 370p in mid June to below 253p this week, which means the stock has slumped 56% since the start of 2016.Management admitted at the time of results that they are uncovered for the weakness of sterling since the EU referendum, putting the company at risk from its high proportion of overseas product sourcing.At 24 April, the group had cash and equivalents in the bank of £233.7m and net debt of £99.6m.Independent retail analyst Nick Bubb said the buyback will use up spare cash and "marginally increase Mike Ashley's already dominant share stake in the company...and may squeeze the bears"."However, in the absence of any new guidance on the outlook for gross margins next year or an update on current trading, Sports Direct's brokers may find plenty of people willing to sell them their shares."Most investors were buying on Thursday, with the shares up 15% at 295.59p by 1030 BST.