Debenhams Share Discussion Threads

[grahamite2] 23/8/2017 08:50

I'm now more unclear than ever.

How can you say Sports Direct is out of the money on an option if you don't know the strike price?

And the Telegraph article is surely wrong. The seller of an option, call or put, doesn't have any rights; it is the holder of the option, the buyer, who has those rights. The seller simply pockets his fee and hopes the price doesn't move against him.

[discodave4] 23/8/2017 08:45

What is the strike price?

[libertine] 23/8/2017 08:38

American Idiot (good name)

I was once told by a wise man that to understand something can take a while, whereas to think you understand takes a second.

The position is exactly as I explained in post 2191

It is not my responsibility to educate you, nor do I have the time or inclination.

But what it appears you are saying is that the CFDs are a long position, and the put option can basically become a short position to cover.

There are two sides to a put option and you have the wrong one. Sports Direct have SOLD the put option.

Sports Direct have the option to BUY 10.5% of the shares from Goldman Sachs at an unknown strike price exposing the firm to a fall in Debenhams’ share price. They are therefore out of the money on the position at present.

How else do you think Sports Direct can claim the voting rights on the option. You don't get voting rights on short positions.

They have the right to buy the shares so can claim to have control over the voting rights.

Perhaps a sample of some of the press clippings can help you understand:-

hxxps://www.retailgazette.co.uk/blog/2016/05/sports-direct-extends-put-option-wager-on-debenhams/

[chinese investor] 23/8/2017 08:11

Good Start !

[simon templar qc] 23/8/2017 07:29

Thanks for your contributions guys, its well explained.

NB:

Disco, I happen to think it is a value trap myself, the share price been bobbing along at in the 40's up and down the trend down but punters relying on yield.

[discodave4] 22/8/2017 23:34

Is this a value trap?Balance sheet is weak - negative equity (big red flag to me), pension £9.5m+RPI pa, net debt forecast to increase to £260m (currently £217m), capex hungry.Small margins, bit of a dinosaur, possibly gearing up for a profit warning but nice div yield!....sp not found support yet either, all IMHO.DD

[american idiot] 22/8/2017 22:28

Yeah, totally agree Edmundshaw.

[edmundshaw] 22/8/2017 22:27

Of course, if Mike Ashley wants to retain 21% he will settle for being paid the price difference (strike vs current) and hold onto the shares (I doubt GS wants to hold the shares, but if they did that would also be fine). Therefore I also doubt there is much risk to longs from the option...

[american idiot] 22/8/2017 21:48

Thats wrong Libertine.

The 'put option' is just basically an insurance policy hedging against the risk of falls in the shareprice.

For example...

Mike Ashley has already bought the long 10.5% ordinary shares position hence he has voting rights for them right now.

Let's say his average share investment position built up is 55p (Purely for this example) and he opens a 'put option' at 45p (market price at the time was 50p)

This would mean his maximum long exposure risk is 10p.

If the shareprice fell to just 20p (for example) then Mike Ashley would still have the right to sell the whole 10.5% long position for 45p.

The risk to the longs is if he exercises his rights, Goldman Sachs would end up with the entire 10.5% of Mike Ashleys ordinary share investment position.

Mike Ashley hasn't physically shorted 10.5% of his holding. Hes just taken out an insurance policy to limit his losses should the share price fall hard therefore at the expiry of the 'put options' there are no positions to buy back. Mike Ashley will either let the options expire (if the shareprice is around the same or higher than the strike price) or exercise his right should the shareprice be significantly lower or just open up a new 'put option' to replace the expired one.



What you are kinda describing is a 'call option'

[libertine] 22/8/2017 19:02

Sports Direct option expires at dates between 27/10 and 30/11.

On those dates they could be obliged to buy the shares representing the 10.5% stake at the strike price agreed with Goldman Sachs over two years ago.

Sports Direct were basically taking a bet that the share price of Debenhams would rally, whilst ensuring they had the ability to take the 10.5% stake.

The option would therefore now be well out of the money in view of the share price drop.

On the other hand as the share price has fallen Sports Direct have taken the opportunity to increase their CFD.

It`s going to be interesting how this all gets unwound. Maybe the option will be extended again.

[american idiot] 22/8/2017 18:04

Its all there in todays RNS. Me thinks Simon Templar has made a schoolboy error :p

6. Date on which issuer notified:

21 August 2017

7. Total positions of person(s) subject to the notification obligation

Resulting situation on the date on which threshold was crossed or reached:

Percentage of voting rights attached to shares: 10.54%

Percentage of voting rights through financial instruments: 10.50%

Total in percentage: 21.04%

[chinese investor] 22/8/2017 17:56

American Idiot,
Thanks for the confirmation.

[american idiot] 22/8/2017 17:55

Simon Templar, He holds 10.5% via shares and 10.54% through financial instruments (CFD's)

Then he has effectively hedged against the 10.5% ordinary share investment via a 'put option' (Ok, lets call it an insurance policy against risk of downside in the shareprice)

My take on it is he wants to build up an investment here but thinks theres potential for a fall in the shareprice. He probably buys the 'put option' as a way of limiting any downside risk whilst holding the overall long position still.

Mike Ashleys (Sports Direct International Plc) hold 21.04% voting rights

[justiceforthemany] 22/8/2017 17:30

I was referring to some of your posts from the past few weeks and months actually. 'niggle' + buddies also. It was another poster who first mentioned the word 'libellous' - indeed. Gloating and profiting from a company's fall, job cuts, a deteriorating economy is just so, so wrong.

The good folk on The North Colonnade will be in touch soon...

[simon templar qc] 22/8/2017 17:18

Come on justiceformany explain why he can hold 21% of the company but only has 10% of votes!

edit:

[justiceforthemany] 22/8/2017 17:13

I hope the QC means you are a real lawyer.
I also hope you are used to representing yourself and your buddies on here.

Copy, paste, send are great functions aren't they?
You and your buddies are now well known to Mr Bucher CEO and also the good folk down at E14 5HS.

At least you will be famous.

[justiceforthemany] 22/8/2017 17:08

How much are you getting paid Simon Templar QC to post your negative drivel, malicious lies and libellous comments day and night?

[chinese investor] 22/8/2017 17:04

I used to create & code derivatives but....
....that was a fair number of years ago !

[simon templar qc] 22/8/2017 17:00

CH

Ashley has both CFDs and Puts no one has been able to explain this, however according to one news source his holding is 21% yet only has 10% of votes!!!

Now work that one out. That suggests to me its a complex bet rather than a pure holding!

Any investors buying in on Ashley may be making a big mistake, despite the so called holding the share price fell back at close nowhere near 42 pence as one poster hoped for.



"Sports Direct's current shareholding would net the company more than 10% of voting rights in Debenhams, and gives Ashley considerable clout in how the department store manages its business."

?

[chinese investor] 22/8/2017 15:29

Can anyone please explain how Mike Ashley holds Put Options and yet he has 21% of the company ?

[stud-muffin] 22/8/2017 15:25

Templar is short - simple.

Talking his book with whatever comes to hand. Such endless bashing is pointless.

For me Debenhams is destination shopping - The new man is in Stevenage today looking at and critiquing the new concept store. Apparently Debenhams are being very 'hands on' with every concession - it all goes through Debenhams and the current opinion is this will deliver.

Time will tell in the mean time Templar you are ignored.

Ps Ashley with 21% looks like a take over is looking likely - I doubt less than 80p would secure. You would (and hopefully will) burn on that news.