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JJB Sports today delayed a lifesaving £100 million fund-raiser after some investors withheld their backing because of speculation that a Sunday newspaper would be making damaging allegations about the chairman.
JJB, which narrowly avoided bankruptcy early this year, strenuously denies that chairman Sir David Jones has behaved inappropriately in any business dealings.
The allegations, said a source close to Sir David, are “highly defamatory and obviously of malicious intent”.
But the market's refusal to support the share offer today highlights just how jumpy it is about the company after a controversial loan Jones received from JJB's arch-rival in sportswear, Sports Direct's owner Mike Ashley.
The company now hopes to be able to seal the deal on Monday, once concerns about the newspaper allegations have dispersed.
If it cannot conclude the fund raiser soon, the company will face severe pressure on its finances.
Advisers were said to be “furious” about the delays.
One senior broker close to several JJB shareholders said some had requested a written assurance from JJB's law firm Herbert Smith categorically stating that Jones had done nothing wrong.
JJB's latest troubles underline the long-term damage wrought on the business by the Jones-Ashley loan scandal.
Jones was seen as having a serious conflict of interest after it emerged that he had borrowed £1.5 million from Ashley earlier this year.
He repaid it hoping to heal the wound to his reputation but since then, there have been claims and counterclaims about various other issues between Jones and his predecessor, Chris Ronnie.
Until today, the plan had appeared to be going well, with Jones's roadshow around investors having succeeded in winning double the £50 million of cash pledges originally hoped for.
Despite today's blow, the JJB camp claims the company would never have got the support it did had Jones not been at the helm, because of its damaged reputation before his arrival.
JJB advisers today claimed the retailer had been putting the finishing touches to a rights issue last night when it suddenly faced a block from the regulators.
The UK Listing Authority wanted clarification on a minor accounting issue, which temporarily threw the deal into turmoil, it was alleged.
That forced JJB to put out a holding statement to the Stock Exchange this morning indicating that the rights issue had been delayed.
This led to several hours of intense speculation and rumourmongering in the City about the cause of delay.
Some investors say that to describe investor concern as merely down to insignificant accounting issues underplays the seriousness of the situation.
This afternoon JJB admitted it would not now be announcing the deal until Monday at the earliest although it had claimed that the 25p-a-share issue had been heavily oversubscribed.
Last month JJB unveiled a surge in first-half losses from £15 million to £42 million.
Like-for-like sales in August collapsed 40% as suppliers withheld goods which left shelves bare. Turnover in JJB shares was unusually high today, with 7.9 million changing hands.
