Sports Direct likely to be priced at bottom of range

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Mike Ashley's attempt to float his £2bn sports empire has had an early setback after a major City spread betting firm slashed the grey market price for the shares.

Cantor Index has cut its estimate of where shares in Sports Direct International will end up on the first day of trading to 248p- 255p. This is at the very bottom of the indicative price range of 250p-310p that was set by the investment banks trying to bring the group to the market.

If the shares list at 250p, that would cut the amount of money raised by Mr Ashley, the founder and sole shareholder, by nearly £200m. He is selling 40 per cent of his holding, worth £720m at the bottom end of the indicative price range and £893m at the top end.

A listing at 250p per share would value the retailer, which owns the Lillywhites store in Piccadilly Circus and has outlets in Belgium, Ireland, the Netherlands and Slovenia, at £1.8bn, compared with £2.23bn at the top of the range. It is not carrying any debt on its balance sheet.

Institutional investors are wary of retail floats after the disappointment of Debenhams, the last major retailer to be floated. Shares in the department store group are below their issue price. The same investment banks - Merrill Lynch, Credit Suisse and Citigroup - that floated Debenhams are also behind Sports Direct.

Cantor has cut its indicated range twice. David Buik, Cantor's analyst, said: "There may even be a case for the underwriters to lower the band." Cantor's rival, IG Index, is more optimistic. Its grey market price is 269p to 275p.

Debenhams' indicative price band was lowered during the marketing of the group to pros-pective investors and even then it listed at the lower end.

So far the Sports Direct team, which includes David Richardson as non-executive chairman, and its chief executive Dave Forsey, has seen potential shareholders in London and the US. The team will head to Europe next week. "The presentation from management seems to be going down well," a spokeswoman for the group said.

The decision by Mr Ashley, who will take the unusual position of executive deputy chairman, to float his company has bemused some analysts. The group is not raising any new money, yet has said that a float is vital if it is to achieve its goal of becoming the world's biggest sports retailer.