Entain urged to consider rethink with BetMGM as shares tumble

Article by : Charles Perrin Nov 2, 2023

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Online gambling company Entain has been told to consider a different tack in terms of its approach to BetMGM if they are going to spark revenue growth.

During 2023, Entain has seen its shares slump 31.2% year-to-date, giving it a market capitalization of $7.22billion, while net gaming revenue has been down, and that has been perpetuated by supposed slow growth in Australia and Italy.

Added to that, the Ladbrokes and Coral owner is expected to see core profit margins at around 25% in 2023, down from 27.1% last year.

Entain has been trying to expand its footprint across the world, and as far as the US is concerned, much of its exposure can be attributed to its joint venture with BetMGM.

As things stand, Entain has a 50% stake in the renowned igaming operator, but Entain finds itself at a bit of a crossroads to bolster top-line growth and restore investor confidence.

But analyst Joseph Stauff, who works for global trading firm Susquehanna, thinks a compromise with BetMGM is vital for Entain to reverse its current course.

He said: “That would release its inflexible operating structure that we think needs to occur in the near term before risking a more permanent step function decrease in market share.”

There are a few options available to Entain. One of these could be that Entain sells half of its stake in BetMGM to partner with MGM Resorts International.

Or Entain could put the company on the market. It has been discussed as a potential takeover target in the past, much to the chagrin of CEO Jette Nygaard-Andersen, who quashed such rumors at the Global Gaming Expo (G2E) in Las Vegas.

BetMGM, meanwhile, has continued to perform strongly in the US, with Q3 net gaming revenue soaring to $458million, rising by 15% compared to 2022 figures.

Entain is facing a dilemma, and while compromising might not come easily to them, striking a deal with BetMGM could ensure they stay relevant in the fiercely competitive igaming industry.