More bad news for Sports Direct. They’re getting kicked out of the FTSE 100.
The sporting goods retailer will officially be thrown out of the FTSE 100 on Wednesday after the company lost more than 50% of its value in just over six months, after a series of scandals and poor financial results.
The company — founded and majority owned by much maligned and often criticised businessman, Mike Ashley — has endured a horrible time of late, and has been accused of mistreating workers and being managed poorly.
The FTSE 100 — which is made up of the 100 biggest companies in Britain by market capitalisation — is reviewed every quarter to ensure that the companies listed on the index are in fact the biggest in the UK. Big drops in share prices often lead to companies being moved into the lesser FTSE 250 index, but a company as prominent as Sports Direct losing its place is rare.
Changes to the make up of the index will be officially announced once the markets close at 4:30 p.m. GMT (11:30 a.m ET) but the Guardian is reporting that Sports Direct’s demotion is certain to happen.
Shares in the retailer have been tanking consistently since last summer thanks to numerous scandals in the company, and criticisms of Ashley.
Ashley, who is currently the retailer’s deputy chairman, has been criticised for giving his daughter’s boyfriend a high-level job and a £10 million loan, despite him having no experience in commercial property development, the field in which he was employed, and earlier this week, a bunch of Sports Direct’s biggest investors took aim at him in the Financial Times.
One investor accused him of treating the company as “his own plaything”. Investors also criticised a “lack of transparency” in Sports Direct, and said that it has “gone as far as it could.”
Mike Ashley owns around 55% of Sports Direct’s shares, making his current stake in the company worth around £1.4 billion. In August 2015 the same stake was worth as much as £3 billion. Here’s how Sports Direct’s fall looks:
Sports Direct has also been criticised for effectively paying workers less than minimum wage. Although since the allegations were made in the Guardian newspaper, Sports Direct has committed to paying at least minimum wage to all staff, costing the company £10 million ($14.5 million).
Sports Direct isn’t the only FTSE 100 constituent set to be demoted on Wednesday evening. Aberdeen Asset Management, the firm set up by chief executive Martin Gilbert in the early 1980s, is also getting the chop. Shares in the firm have dropped from £4.75 each in early 2015, to just £2.53 now.
While its bad news for Sports Direct and Aberdeen, the demotions mean that some FTSE 250 companies will be promoted. Bookmaker Paddy Power, which announced a merger with Betfair last year, is one of the companies expected to move up to the FTSE 100 at the end of trading this afternoon.
Sports Direct joins Morrisons in being relegated from the financial big leagues after the supermarket was demoted at the FTSE’s last review in December. The chain lost its place after shares fell more than 50% in just over a year, thanks largely to the ultra-competitive nature of the UK grocery market.
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