- Consortium of industry experts take 6.5% stake
- Could see proposals to change leadership and strategy
- Shares down 90% since William Hill acquisition
Shares in embattled gambling and gaming company 888 Holdings (888) surged 20% to 96.2p after a consortium of investors composed of industry veterans disclosed a 6.5% stake.
FS Gaming investments disclosed its stake on Tuesday (6 June) and Bloomberg reported it is pushing for changes to boost the value of the company which could involve leadership and strategic changes.
A spokesperson for 888 told Reuters: ‘We welcome the investment of FS Gaming, which we believe reflects the significant value-creation potential in our business.’
Investment director at AJ Bell Russ Mould commented: ‘Troubled gambling stock 888, owner of the William Hill brand, received an injection of confidence as one-time directors of GVC (now part of Entain), including its former CEO Kenny Alexander, took advantage of a bombed-out share price to pick up a 6.5% stake.
‘The shares surged thanks to the implication that, for all its regulatory troubles, industry insiders still see value in the business and its brands.’
Since purchasing the international businesses of William Hill from Las Vegas-based casino operator Caesars Entertainment (CZR:NASDAQ) in September 2021 for £2.2 billion shares, shares in 888 have lost around 90% of their value.
On 31 January 2023 the shares dropped by almost a third after the company’s long time CEO Itai Pazner resigned following an internal probe into some of its operations in the Middle East.
The company subsequently revealed an internal investigation had not thrown-up any further issues and that new robust procedures were now in place.
HIGH DEBT LEVELS
The William Hill takeover catapulted 888 into third spot globally in terms of online revenues (£1.3 billion), and number three position in the UK and Spain and top five across several other markets.
However, the company took on large debts to finance the transaction which pushed net debt to EBITDA (earnings before interest, tax, depreciation, and amortisation) to 5.6 times which is considered high.
The company is aiming to reduce net debt to EBITDA to under 3.5 times by 2025. 888 is also guiding to generate at least £2 billion of revenue and earnings per share of 35p in 2025.
In April, the group gave an upbeat full-year outlook and guided for ‘significant’ growth in adjusted EBITDA for 2023 and achieving an EBITDA margin of at least 20%.
Disclaimer: Financial services company AJ Bell referenced in the article owns shares magazine. The author of the article (Martin Gamble) and the editor of the article (Daniel Coatsworth) own shares in AJ Bell.
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