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Silvia Pavlof November 23, 2023 3 min read
Entain Faces Investor Uprising as Activist Hedge Funds Demand Change
The hedge funds based in New York have quietly secured stakes in the UK gambling behemoth, contributing to the increasing dissatisfaction voiced by investors
Entain, the owner of Ladbrokes and Coral brands, is grappling with mounting pressure from two additional US activist hedge funds, Dendur Capital and Sachem Head Capital Management, joining Eminence Capital in expressing concerns about the company’s stagnant share price and the leadership of CEO Jette Nygaard-Andersen.
New York-Based Hedge Funds Stealthily Invest Amidst CEO Criticism
The New York-based funds have discreetly acquired positions in the UK gambling giant, adding to the growing chorus of discontent from investors, reported the Financial Times. Entain’s share price has plummeted by over a third this year to a three-year low, a stark contrast to the 11% rise in the share price of its rival, Flutter.
The activist investors cite a series of setbacks, including a regulatory crackdown on online betting in the UK and management missteps, as reasons for their apprehension. A pivotal moment was the equity raise this summer, which, while funding the acquisition of Polish gaming company STS Holding, adversely affected Entain’s share price.
Contrary to the company’s 23 consecutive quarters of double-digit growth in online revenues, Entain warned in September of a potential “low single-digit percent” decline in pro forma online gaming revenues for the year.
The spotlight is firmly on CEO Jette Nygaard-Andersen, a former non-executive director at Entain with minimal experience in the gambling sector. She assumed the role in January 2021 after her predecessor’s sudden departure during a takeover bid. Activists have been critical of her leadership, attributing the company’s woes to “a lot of self-inflicted wounds.”
Activists Demand Inclusion as Entain Responds with Board Pledges
In response to the activist pressure, Entain has pledged to appoint four new non-executive directors to its board. However, the activists, led by Eminence’s founder Ricky Sandler, are pushing for his inclusion on the board and a role in filling other vacant positions.
Entain expressed its commitment to addressing shareholder concerns and outlined a strategic plan for organic business expansion, improved margins, and gaining market share in the burgeoning US betting market.
The company’s chair, Barry Gibson, has urged investors to exercise patience to avoid disrupting negotiations over a potential £585 million ($732.2 million) settlement with UK authorities regarding historic bribery charges. This settlement is expected to be finalized in the coming month.
Adding to the challenges, London-based hedge funds Perbak Capital Partners and Ilex Capital Partners have taken substantial short positions against Entain, further intensifying the scrutiny on the company’s future prospects.
One silver lining for Entain is its joint venture with MGM—BetMGM—which stands as the third most popular betting app in the US online market. Despite speculation of potential bids, MGM’s CEO Bill Hornbuckle downplayed the likelihood of a second approach in the near future, leaving Entain’s fate hanging in the balance amidst this storm of investor discontent.