Investor Unrest With Entain Share Price

Entain, the owner of Ladbrokes and Coral brands, is facing growing investor unrest as two more US activist hedge funds expressed concerns over the company’s languishing share price and the ability of its chief executive, Jette Nygaard-Andersen, according to a report in the Times newspaper. New York-based funds Sachem Head Capital Management and Dendur Capital have recently built positions in Entain, joining Eminence Capital, which went public with its grievances earlier this year. The activists are worried about flagging sales in Entain’s core markets, management mishaps, and costly deals. This article explores the challenges faced by Entain, the impact on its share price, and the potential strategies to improve its performance.

The company has been experiencing a decline in its share price, falling by more than a third to a three-year low. In contrast, its rival Flutter’s share price has climbed by 11% this year. The activists have raised concerns about Entain’s sales in core markets, including the UK, where regulatory crackdowns on the online betting industry have affected the company. Additionally, management mishaps and costly deals have further damaged Entain’s performance. One notable misstep was an equity raise this summer, which hurt the company’s share price despite funding the takeover of a Polish gaming company.

Furthermore, Entain’s online gaming revenues have shown a decline after 23 consecutive quarters of double-digit growth. The company warned of a “low single-digit per cent” fall in pro forma online gaming revenues this year. These challenges have led to growing dissatisfaction among shareholders and a loss of faith in CEO Jette Nygaard-Andersen.

Eminence Capital, Sachem Head Capital Management, and Dendur Capital have all expressed their concerns and met with Entain’s top executives to address the issues. Shareholders have reportedly lost faith in Nygaard-Andersen and are seeking her removal in the coming months. In response, Entain has pledged to install four new non-executive directors to its board to fill gaps following departures this year. However, the activists are pushing for Eminence’s founder, Ricky Sandler, to be appointed to the board and have a role in filling the outstanding vacancies.

Entain has stated its commitment to addressing the questions and concerns of shareholders. The company has outlined a clear plan to expand the business organically, improve margins, and win market share in the booming US betting market. Nygaard-Andersen’s re-election with strong shareholder support at the annual general meeting in April has been cited as a testament to her leadership.

Under Nygaard-Andersen’s leadership, Entain has made 11 bolt-on acquisitions of gaming companies, with varying degrees of success. However, Eminence Capital criticized Entain’s decision to raise £600mn of equity to finance the £750mn takeover of Polish betting operator STS. This decision, along with other factors, has contributed to the decline in Entain’s market capitalization to £5.2bn, well below the value of takeover offers received from casino group MGM International and sports betting operator DraftKings.

In addition to activist pressure, two London-based hedge funds, Perbak Capital Partners and Ilex Capital Partners, have taken short positions against Entain worth more than £25mn each in recent months. These short positions indicate further skepticism about the company’s performance. Meanwhile, Entain is also facing pressure from UK authorities regarding historic bribery charges linked to a former Turkish subsidiary. The company is negotiating an estimated £585mn settlement, which could be reached as soon as next month.

Despite the challenges, Entain’s joint venture with MGM, BetMGM, has been successful in the online US market, becoming the third most popular betting app. Some shareholders still hope that MGM will make a bid for Entain, which could potentially boost the company’s share price. However, MGM’s chief executive, Bill Hornbuckle, downplayed the likelihood of a second approach in the near future.