Shares in embattled Ladbrokes and Coral owner Entain (ENT) plunged by almost a tenth on Monday (29 July), plumbing new four-year lows after the gambling giant’s US joint-venture partner BetMGM said it expected to deploy ‘greater than expected’ marketing in iGaming the back half of the year.
This means the business, currently the third-largest US gambling company by revenue, is now expected to post another loss in the second half of the year in line with the £123 million it posted in the first six months.
While management put a brave face on the announcement, highlighting the need to maximise continued strength and attractive returns from iGaming, the upshot is medium-term profitability for the US business has been delayed.
That may not sound too bad but the problem for investors is it blows a hole in analysts’ consensus expectations, implying a 25% hit to current 2024 EPS (earnings per share) according to analysts at Jefferies.
More concerning for investors is the knock-on effect on future years. The previous guidance of $500 million EBITDA (earnings before interest, tax, depreciation and amortisation) in 2026 has morphed into a vague ‘in coming years’.
The latest setback will give further ammunition to activist investor Eminence Capital, whose founder Jerry Sandler was appointed to Entain’s board in January and which has repeatedly urged the company to sell all or part of its share in the BetMGM joint venture.
Part of its criticism stems from Entain turning down a takeover offer in 2021 from its joint venture partner MGM Resorts International (MGM:NYSE) pitched at £13.85 per share, more than two times the current share price.
However, that pales into significance compared to a proposed cash and share offer worth circa £28 per share from fantasy sports-betting firm DraftKings (DKNG:NASDAQ) which the board also rejected and was eventually withdrawn.
The chief executive at the time of these tumultuous events was Jette Nygaard-Anderson, who left the business abruptly in December 2023.
The resignation followed Entain’s £585.5 million settlement of a Crown Prosecution case relating to historic activities in Turkey undertaken by prior management. Previous chief executive Kenny Alexander abruptly resigned ahead of the widening HMRC investigation.
His replacement Shay Segev was also packing his bags before too long underlining the lack of continuity at the top of the company.
Investors will be hoping for some stability with the arrival of Gavin Isaacs, who was appointed as new chief executive on 22 July.
Isaacs is the former head of US-based lottery games and betting firm Scientific Games Corp and has 25 years’ industry experience including a stint at DraftKings, which may lead to speculation of another takeover attempt in time.
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