Mike Ashley is on the verge of losing control of £4 billion Sports Direct

Mike Ashley (r) chats with Newcastle United Lee CharnleyGettyMike Ashley (r) chats with Newcastle United Lee Charnley.

British billionaire Mike Ashley may lose his control over the bargain sportswear company he built from scratch — £4 billion ($US6.15 billion) Sports Direct — because some shareholders have lost confidence in him and the board.

Sports Direct will hold its Annual General Meeting in Shirebrook at 11 a.m. BST today at its head office in Shirebrook, Derbyshire. It will also post its trading update relating to the period from April 27 to September 8.

It said in a regulatory statement that trading is still in line with management expectations and “there has been no material change in the financial position of the Group since the end of the most recent reporting period on April 26.”

“We continue to focus on the roll out of large format city centre stores and the expansion of our National Distribution Centre in Shirebrook,” added Dave Forsey, CEO of Sports Direct International. “Consistent with previous guidance we continue to target the revised Underlying EBITDA target (before share scheme costs) of £420 million ($US646 million) for the current period.”

This week Royal London Asset Management, one of the most influential institutional investors in Britain’s capital, made the unprecedented move of hitting out at Ashley publicly through the press.

In a public statement, Royal London listed reasons for why it has lost confidence in the Sports Direct board and will vote against the re-election of Ashley, who is the founder and chairman.

“We have lost confidence in the board and are very concerned about the long list of corporate governance failings that have not been addressed,” said Ashley Hamilton Claxton, corporate governance manager at Royal London, in a public statement.

“We question how a board can effectively function when the executive deputy chairman fails to attend four board meetings, even if they are unscheduled. The board’s decision to lower the earnings targets for the executive directors’ bonus scheme is unacceptable by UK standards and serves as yet another example of poor governance, so we’re voting against the remuneration report and the share scheme amendment as well.”

Royal London only owns 0.018% of Sports Direct shares, worth £8.3 million ($US12.7 million), but the publicly damning indictment of Ashley’s leadership from a prominent institutional investor may influence other, less vocal, shareholders.

Since Royal London spoke out on Monday, shares have fallen by 2%:

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