Entain Pressured by US Hedge Funds over Leadership and Share Price

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Entain, the company behind the Ladbrokes and Coral brands, is facing significant challenges due to dissatisfaction expressed by several US activist hedge funds.

Dendur Capital and Sachem Head Capital Management have joined forces with Eminence Capital, voicing concerns over the company’s stagnant share price and the effectiveness of CEO Jette Nygaard-Andersen.

New York Funds Increase Stakes amidst Growing Discontent

In what seems to be a strategic move, New York-based hedge funds, including Dendur Capital and Sachem Head Capital Management, have been gradually building their stakes in the British gambling firm. This action comes amidst reports of dissatisfaction among investors. The company’s share value has seen a significant drop, falling over a third this year to reach its lowest in three years, while its competitor Flutter Entertainment has experienced an 11% increase.

These activist investors point to several setbacks for their growing concern, such as UK regulatory measures against online betting and various strategic missteps by the management. An equity raise this past summer, intended to fund the acquisition of Polish gaming company STS Holding, had a detrimental effect on Entain’s share value. This is in contrast to the company’s prior record of 23 consecutive quarters of robust online revenue growth, with Entain recently forecasting a potential slight decline in online gaming revenues for the year.

The focus of investor criticism is CEO Jette Nygaard-Andersen, who took over the role in January 2021 after her predecessor’s abrupt departure. Her relatively limited experience in the gambling industry has been a point of contention for the activists, who attribute many of the company’s current issues to her leadership.

Entain’s Responds by Expanding Board

In an attempt to address these concerns, Entain has announced plans to add four new non-executive directors to its board. Nevertheless, the activist investors, with Eminence’s Ricky Sandler at the helm, are demanding a more direct role in board appointments, including Sandler’s own inclusion.

As Entain strives to reassure shareholders, it has outlined a strategy focusing on organic growth, margin improvement, and expanding its presence in the lucrative US betting market. Barry Gibson, the company’s chair, has asked for patience from investors, especially considering ongoing negotiations over a significant settlement related to historic bribery charges.

The company’s challenges are further compounded by sizeable short positions against Entain by London-based hedge funds Perbak Capital Partners and Ilex Capital Partners. However, a glimmer of hope remains with its joint venture BetMGM, a collaboration with MGM, which is currently the third most popular betting app in the US. MGM CEO Bill Hornbuckle, however, has tempered expectations of any imminent bids for Entain, leaving the company in a precarious position amidst this wave of investor dissatisfaction.

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