Alexander assures investors
The beleaguered chief of GVC Holdings, Kenneth Alexander, has assured investors he will not sell any more shares while he remains as head of the company. GVC is the owner of top betting brands such as Ladbrokes, Coral, and bwin.
Alexander was given more than 450,000 extra shares on March 27, bringing his current total stake to nearly 1.7m shares.
On March 8, Alexander sold 2.06m shares on the stock market, 76% of his stake in GVC, to widespread fury from other investors.
Alexander’s fire sale triggered a drop in value of 18% for GVC, its biggest fall in nine years, from £6.84 ($8.98) to £5.60 ($7.35). This was the lowest value for GVC shares since 2016, despite the company having just announced excellent financial results for 2018.
Shareholders reacted with anger to Alexander’s move, which netted him £13.7m ($18.0m), but saw their own investments lose money. It was unclear why he sold off most of his stake, as he was in the process of a three-year strategy for GVC and said he was committed to staying.
Investment director Russ Mould, of stockbroking advisor AJ Bell, said: “The two directors have pledged not to sell any more while they ‘continue’ at GVC. Investors may have read that statement as implying the pair aren’t going to be around that long.
“Mr. Alexander reassures that he is ‘here for the long term’ because his current plan will take at least three years to accomplish. The market is clearly confused as to why the pair have decided to sell down now if there is still value to be created.”
However, three days after offloading his shares, Alexander said the company’s results for 2018 indicated that GVC was “significantly undervalued.” GVC had reported net gaming revenues of £3bn ($3.9bn), a massive boost from £815.9m ($1.07bn) in 2017.
No more share sell-offs, says Alexander
Alexander was awarded further shares on March 27 by GVC, as part of the incentive scheme written into his contract. The company gifted him 453,625 shares in the owner of Ladbrokes, Coral and bwin. This broke down as 344,332 shares, plus a deferred bonus of another 109,293 shares.
He now owns some 1.7m shares, valued at £9.2m ($12m).
Yesterday, he claimed he would not be offloading more shares while he remains CEO of GVC.
He said: “I remain totally committed to GVC for the long term, and as such I will not sell any further shares in GVC while I am CEO. We have had an excellent start to the year and I look forward to updating on progress in our Q1 trading update on April 5, 2019 and at the Capital Markets Day on May 16, 2019.”
GVC’s share price rose yesterday in response to Alexander’s undertaking. The shares closed on March 28 at £5.39 ($7.07), up 5.5%, although this is still a long way off the £6.84 ($8.98) price before Alexander’s fire sale.
The rally in GVC’s share price had a positive knock-on effect for other gambling giants. Yesterday, Paddy Power Betfair’s share price rose by 2%, William Hill by 3.6%, and 888 by 3.4%.
Pressure still on for GVC
Despite the stock market boost, GVC remains under pressure. The UK-based gambling operator is facing ever stricter regulation in its domestic market.
The UK Gambling Commission is cracking down on the exploitation of problem gamblers, retracting gambling ads, and boosting protections for children. It is currently consulting on banning credit cards for online gambling in a further attempt to limit harm from gambling.
Gambling tax in the UK will increase next month to 21%, and on April 1 the maximum stake on fixed odds betting terminals (FOBTs) will drop from £100 to £2. Ladbrokes has already committed to closing down many of its betting shops. It says it will face huge revenue losses from FOBTs.
GVC has begun expanding its US operations, where the regulatory space is currently less burdensome. For example, it has formed a joint venture with MGM Resorts International “to create a world-class sports betting and online gaming platform” in the US.
Chairman Lee Feldman is poised to depart next year and GVC is already hunting for his successor. He had already been in the position for longer than the nine years currently permitted under UK corporate governance rules.
Feldman sold £6m ($7.9m) of his own shares the same day as Alexander, which suggested to shareholders and analysts this was a signal he really is about to depart. A GVC spokesperson said Feldman’s exit was “in the offing for a fair while before the share sale.”
And nine months ago, shareholders rebelled against director Peter Isola, forcing his departure. His sacking was triggered by the revelation that two company executives between them earned salaries totaling £67m ($87.8m).