It was always a given that the potential upside from their ventures in to the US betting market space meant that the listed UK gambling companies would be able to generate idiosyncratic growth in excess of the headwinds impacting the broader global economy. The recent performance of the shares in these companies in the wake of the recent market sell off in response to Brexit and China trade talk wobbles supported this thesis. It would be fair to say that the shares in these companies have indeed enjoyed something of an Indian Summer. The star peformer has been GVC Holdings up 39% from its year low.
It is important to remember, however, that these stocks have represented something of a car crash for long term investors and that they remain significantly below
their 2018 all-time US BETTING MARKET MANIA highs. So, for example, whilst shares in Flutter Entertinment are up 29% YTD - they are still down 15% YOY, suggestive of the fact that some in the market are not confident that the proposed merger will clear the relevent regulatory hurdles.
It should be noted that the muppets that rushed in to buy shares in FLUTTER ENTERTAINMENT in response to the news that the company had agreed an all-share deal to merge with Toronto-listed The Stars Group earlier last week at over ninety pounds - intraday - are now significantly under water, in some cases down by as much as 16 per cent.
The gambling industry is not an industry known for its strategic giants. Heterogenous strategies fuelled by notions such as competitive advantage,
distinctive competence and product differentiation are not the order of the day. Indeed, history teaches us that this is an industry in which isomorphic forces
give rise to homegenous thinking when it comes to strategy formulation. Accordingly one can anticipate that at we write this both William Hill and GVC will be busily attempting to nail down a significant US strategic partner.
Current Price V. 2018 High
It is always good to throw in a little bit of an international comparison. We have continually pointed out - the curse of regulated betting markets - increased competition, higher marketing costs, increased taxation, lower margins, and lower profitability generally on the back of intense competition. The table below includes a comparative analysis of the share prices of the scandic betting companies Betsson and Kindred Group, comparing their price at the date of the opening of the newly regulated Swedish betting market with their price today. As can clearly be seen, both companies have had their share prices monkey hammered
compared with their UK listed peers, which, as we have seen, have enjoyed a US betting market bounce.
On September 27 Kindred Group announced that its brand Unibet would take on its second U.S. Betting Market licence in Pennsylvania in
partnership with Mohegan Sun Pocono.
1 Jan 2018
Our content is intended to be used and must be used for informational purposes only.
Pasteur (1854) "chance favors only the prepared mind."