pounds 154m wiped off Dixons in share sale fall-out

Shares in Dixons lost more than 7 per cent of their value yesterday as the fall-out from Friday's share sale by Sir Stanley Kalms, chairman, continued and news of fresh "sell" advice emerged from a broker.

The 38p plunge to 479p knocked pounds 154m off the company's value as investors reacted to City talk that Merrill Lynch had changed its recommendation on the stock from "hold" to "reduce". Merrill Lynch's advice to its clients, which will be distributed in the next two days, follows the decision by Sir Stanley to sell a third of his holding in the company, raising pounds 5.7m. This was just days after he criticised a broker at Greig Middleton for issuing "sell" advice to clients on Dixons shares.

Sir Stanley had originally said that he would complain to the Securities and Futures Authority about the note by Greig Middleton's Tony Cooper. Yesterday the company said it would not pursue any action. "As far as Dixons is concerned, this matter is closed," the company said.

Mr Cooper also stood firm: "We stand by our research note. This latest fall in the share price is nothing to do with us. It is Stanley Kalms who has done the damage."

Sir Stanley sold 1.1 million shares in the company late on Friday. No reason was given for the sale though it included options which had reached their expiry date. "There is always a furore when Sir Stanley sells shares in Dixons," a company spokesman said. "He did it for personal reasons, though I am not aware of the specific circumstances."

One City analyst said: "It does seem irrational to sell shares after attacking someone for advising people to do the same thing."

According to Greig Middleton, Dixons' shares are vulnerable due to concerns over possible interest rate rises, the implementation of an insurance premium tax and estimates that the retail sector is nearing the peak of its cycle. Mr Cooper said that Dixons would experience a slower rate of sales growth and higher costs, delivering a "series of shocks" to the Dixons share price.

With Dixons shares at their lowest point since last summer the City was divided last night on its prospects. One analyst said it might face a wave of negative sentiment as a result of the "bad odour" created by Sir Stanley's share sale. Others said the shares looked oversold.

Dixons shares have been one of the best-performing larger companies in the past two years rising from 202p in January 1995 to a high of 586p in October.

In a circular on 30 January Greig Middleton said that with some institutions taking profits "it will take something special to re-ignite interest".