Ashley bets on Frasers’ future

Frasers’ shares closed 9 per cent lower on 8 December, despite the company announcing a 53 per cent increase in pre-tax profit to £285mn and a 13 per cent increase in revenue in its results for the half-year to 23 October. The shares fell as the company highlighted a ‘challenging’ macroeconomic environment, although it stuck to its full-year adjusted pre-tax profit forecast of £450mn-£500mn.

Ashley took the opportunity to place a spread bet, taking an interest in 100,000 shares at the prevailing price of 815p a share. This interest is funded, at least in part, through Ashley’s sale of put options on 500,000 shares. The options have an expiry date of September 2023 and a strike price of 900p.

If Frasers’ share price is higher than 900p by next September, the options expire worthless and Ashley would retain his interest in the more valuable shares. However, if the share price does not hit 900p by that time, the option holders would have the right to sell shares to Ashley at that price. They could then buy the shares more cheaply on the open market and pocket the difference.

Since its half-year results period ended, Frasers has bought beleaguered Savile Row tailor Gieves and Hawkes, upped its holding in designer label Hugo Boss to around34 per cent – a transaction partly financed by Frasers selling put options – bought homewares brand Amara Living, paid £15.8mn for the Coventry Building Society Arena and bought 15 businesses from JD Sports for £47.5mn.