Liberum analysts urge Sports Direct shareholders to "align their interests" with Mike Ashley's

Helen Cahill
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It's crunch time for Sports Direct's founder Mike Ashley (Source: Getty)

Investors are competing to see who can shout the loudest over the questionable corporate governance of Sports Direct – but one set of analysts has urged investors to "align their interests with those of the founder" Mike Ashley.

Liberum analysts said today that shareholders only need to look at Sports Direct's past to understand. Things aren't actually bad for Sports Direct at the moment, they argue; the company is just at the bottom of the "downgrade cycle". Now is the perfect time to buy, because the share price will pick up soon.

To back up the argument, Liberum provided this graph illustrating the history of share buybacks at Sports Direct:

Is now a good time to buy Sports Direct shares? (Source: Liberum)

The last share buyback at Sports Direct happened between 2007-09, which accounted for 21 per cent of the retailer's shares. Mike Ashley (MASH) increased his stake from 55 per cent to 72 per cent.

Then, in 2013-14, Ashley sold 80m shares at a price 400 per cent above the median price at the time of the buyback. Liberum analysts said: "We feel history may repeat itself."

Read more: Even more shareholder groups have piled in to take a shot at Mike Ashley

Recently, Liberum analysts cut 35 per cent from the company's projected earnings per share (EPS) for 2017. But, today they said the share buyback could drive 25 per cent EPS growth.

"While organic earnings are expected to be negative over this time, we see the potential to acquire around 20 per cent of the company as a key support," they said.

At the upcoming AGM, Sports Direct will be seeking approval for a more extensive buyback programme.

But the issue is likely to be overshadowed by allegations of working conditions similar to those of a "Victorian workhouse" at one of Sports Direct's warehouses, and a potential investor revolt against the board.

Chairman Keith Hellawell will be in danger; Legal & General Investment Management has called for his removal from the board because of what has happened to the company's share price since 2014:

Meanwhile, other shareholder advice groups have called for Ashley to step down, and have demanded the company conducts an independent review of corporate governance.

Both Hellawell and Ashley will be hoping the buyback programme will be enough to save their jobs on the board of Sports Direct.

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