Entain Plc (OTC: GMVHY) has seen a surge in its U.S.-listed shares following reports that activist investors have purchased stakes in the company. New York-based hedge funds Dendur Capital and Sached Heam Capital have acquired positions in the gaming company and are reportedly pressuring Entain to grant Eminence Capital founder Ricky Sandler a seat on the board. Sandler, a major shareholder in the sportsbook operator, has openly criticized the management of Entain.
These activist investors are pushing for changes within the company, including having Sandler appointed as an Entain director and being directly involved in filling other vacancies on the board. Sandler’s firm has been an investor in Entain for over three years and as of June, owned 2.1% of the company’s outstanding shares.
There is speculation that these activist investors could also move to push out CEO Jette Nygaard-Andersen, who took over the position in January 2021 after the abrupt departure of Kenny Alexander. Critics have raised concerns about her lack of direct gaming industry experience and have heightened their criticism following the STS acquisition and a disappointing 2023 net gaming revenue forecast.
Investors are worried about increasing regulatory challenges in the UK, where Entain operates, and they fear the possibility of unsolicited takeover bids due to the company’s depressed market capitalization. There are also concerns about internal matters at the company, despite Nygaard-Andersen receiving 99% shareholder support at the annual meeting in April.
The future of Entain’s 50% stake in BetMGM, a U.S. online sportsbook and iGaming operator, remains uncertain. Activist investors could push for the divestiture of this stake, especially as Nygaard-Andersen recently mentioned that joint ventures don’t last forever. Selling the BetMGM interest could reduce Entain’s capital commitments in the expensive U.S. market and potentially deter potential buyers.
The acquisition offers made to Entain in 2021 by MGM Resorts International and DraftKings were largely influenced by BetMGM, so a potential divestment could impact the company’s attractiveness to buyers. While these potential changes could have a significant impact on the company, it remains to be seen how Entain and its management will respond to the activist investor pressure.