Auditor crisis sees Sports Direct’s share price crash to eight-year low

Sports Direct’s shares were decimated yesterday after Grant Thornton quit as the retailer’s auditor with the Big 4 rivals already seemingly ruled themselves out.

Its shares closed down 10% – and are down by nearly half in the last year – as the latest governance problem hit the retail group.

Its closing share price valued the House of Fraser and Flannels owner at £1.14bn. It had been worth around £5bn five years ago.

£130m was wiped off the company’s value, with majority shareholder Mike Ashley hit with a paper loss of £80m, as its shares tumbled to an eight-year low after Grant Thornton’s resignation.

Sports Direct’s share price has been in decline since early 2014:

Sports Direct was embarassed last month when it failed to deliver its already-delayed figures to the stock market – which it became clear was due to an unexpected £605m tax bill.

But in its annual report published on Monday – when Sports Direct said it would ask shareholders to reappoint Grant Thornton – the retailer acknowledged there had been “some barriers” put up by Deloitte, EY, KPMG and PwC, who were not keen to take on the group’s audits.

Stock market rules require an auditor to be in place, which would usually be confirmed at the annual meeting. Sports Direct has just four weeks to find a solution, otherwise Business Secretary Andrea Leadsom would have the power to make an appointment.

Owner Mike Ashley’s brash and sometimes authoritarian approach to corporate governance, which has upset shareholders before, will not make it easier to resolve.

Deloitte, which does Sports Direct’s tax compliance and advisory work, would not be able to also take on the audit.

KPMG pointed to conflicts of interest with existing clients, although Ashley does not think this objection is “insurmountable”, while he also said EY’s “reluctance” because it worked on the House of Fraser administration need not be a “barrier”.

Ashley’s “early discussions” also threw up PwC’s “reluctance to engage based on our ownership structure”.