Newcastle owner loses over £300 million in share price gamble

Spread betting is an interesting game. We were talking about it in our office at the end of last week –for many people it allows entry into a world of speculative gambling which would otherwise be denied them. There are no warm feelings for Mike Ashley in the Newcastle United supporters enclosure – I wonder how this news was greeted by them. This story ran in the daily mirror  on Saturday and was written by Adrian Butler. 

Football tycoon Mike Ashley has lost £300million this week in a BET on crisis-hit bank HBOS.

The Newcastle United owner watched helplessly as HBOS shares plunged in value on Tuesday and Wednesday under sustained attack from speculators.

Ashley made his mammoth  bet in March on HBOS’s share price when the price was just under £6.

He gambled that the shares would go up and put down £50million – a 10 per cent deposit of the total HALF A BILLION pounds he was gambling.

The terms of the bet meant that for every penny HBOS’s share price went up Ashley made £800,000, and for every penny it went down, he lost the same amount.

Betting on the performance of shares – financial spread betting – is a way of playing the markets while avoiding capital gains tax. High-rolling gamblers predict what will happen to a firm’s share price and can make millions if they get it right.

But if they get it wrong and the shares move in the opposite direction, they end up having to pay fortunes to the financial bookmakers who take the bets.

On Wednesday, as the world reeled from the collapse of US bank Lehman Brothers and insurer AIG, HBOS shares went into freefall amid fears about dodgy debts.

Ashley lost £100million in just one hour as the shares plummeted to an all-time low of 88p.

When trading closed for the day after the price rallied slightly, Ashley had lost £50million in a day, with the world economy in meltdown. He would have been required to wire cash to betting firm IG Index to cover the loss.

The £50million hit took Ashley’s loss on his HBOS punt to the mind-boggling total of £380million.

Amid the Lloyds Bank rescue of HBOS, the share price recovered steadily on Thursday and Friday to £2.22, but that still left Ashley £300million down.

And as he was losing millions, Newcastle’s owner – whose wealth has been estimated at £1.4billion – was also struggling to sell the club for his asking price, potentially putting him out of pocket by another £100million.

Ashley decided to quit Newcastle after he was blamed by angry fans for manager Kevin Keegan’s exit earlier this month. He has been in Dubai trying to sell the club for £400million – but offers so far have valued it at only £200million.

Ashley said of his gambling loss at the time: “It is what it is. Unfortunately every morning I get up, I don’t always back the winner.”

A source close to the businessman said: “Mike has had the week from hell. He was complaining he would be left disastrously out of pocket from Newcastle. Then he is being stalked by this bet, which is killing him financially.”

Spread-betting expert Malcolm Pryor said: “I’ve never heard of a loss as big as this.  Anyone could have seen the way the financial market was going this week – what made Ashley think HBOS would be the exception? Ashley looks like he’s made the classic poker error – he knows he has a bad hand but he won’t get out of the pot.”

His losses began with £129million in March, then grew to £200million by July. But his real problems hit last week, when he told pals: “I’ve lost £300million this week.”

Ashley has admitted he loves gambling, spending many nights in the exclusive Fifty casino on St James Street, Central London.

“Many of the most successful people I know are gamblers,” he said. “When you get up on Monday morning you are in the risk business. But there is a fine line between an entrepreneurial investor and a gambler.

“People say: how do you play poker? My answer is ‘all in’ – I’ve always been the same.”

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