The pressure is well and truly on Mike Ashley now and we can only wait and see to find out how it impacts on his relationship with Newcastle United.
The NUFC owner had seen a huge fall in the Sports Direct share price in early December and with him owning 330m (55.1%) of the total shareholding, the 20% that was knocked off the share price in a fortnight, represented around half a billion pounds off the value of his personal fortune.
However, Friday has seen things get an awful lot worse for Mike Ashley, with Sports Direct having to make a statement to the Stock Exchange, warning that annual profits will be up to £40m lower than expected, blaming tough trading on the high street and unseasonal weather in the run-up to Christmas.
This has sent the Sports Direct into further freefall, starting the day on 512p it is now trading as low as 429p, representing another 16% drop in the share value in only a few hours trading.
Taking the total drop from 2 December 2015 to today (8 January 2016), only 37 days later, it has gone from 737p to 429p, in total knocking over 40% off the share price as things stand, which represents a drop for Mike Ashley’s fortune of a cool £1billion.
His Sports Direct shareholding worth roughly £2.5billion at the start of December and ‘only’ £1.5billion now.
The shock profits warning comes just a month after the Guardian investigation that revealed Sports Direct effectively pays thousands of temporary workers below the national minimum wage of £6.70 an hour and subjects warehouse staff to a regime of searches and surveillance.
Mike Ashley’s response to the huge pressure that built up from MPs, pressure groups and worried shareholders, was to raise the pay of thousands of workers by 15p per hour, which when you then factor the time it can take for security checks, means that workers are just about getting the minimum wage for total time spent at Sports Direct.
In the stock market statement, Sports Direct said that it now expected to miss its target for underlying profits of £420m. It is forecasting that profits will now be between £380m and £420m for the year to the end of April.
The recent financial figures released pre-Xmas by Sports Direct looked ok in terms of profit, but the fine details instantly showed that sales had hardly moved from a year ago, with almost the entire profit figure a result of selling shares in the currently thriving rival JD Sports – how ironic is that!
The financial figures were preceded by the latest investigation into the dubious way the Sports Direct group operates under Mike Ashley’s leadership, with the Guardian picking up the gauntlet this time.
If the share price doesn’t recover, then investors who have seen 40% knocked off the value of their shareholdings, at least in part due to the negative perception of how Mike Ashley runs the business, may be more ready to make things a lot more difficult for the dominant shareholder in the future.
No wonder then that the Newcastle United owner has been increasingly diversifying into other areas, including property development and gyms.
If the Sports Direct brand is becoming ever more toxic due to its association with Mike Ashley, then as we said three weeks ago, are we nearing a point where he will be forced to take a less active role and possibly even significantly dilute his shareholding.
If that was the case, then the free worldwide advertising of his Sports Direct empire becomes ever less valuable to the NUFC owner and just maybe, that pledge he made to stay at Newcastle United ‘at least until 2016’ might have some relevance.
Some dismiss the idea that the free worldwide advertising is Mike Ashley’s biggest reason for owning Newcastle United, even though his representatives told Sir John Hall this when he bought the club, but if it is then we could be heading for a potential change of ownership that the vast majority of Newcastle fans would welcome with open arms.