Entain will drop out of the FTSE 100 into the mid-cap FTSE 250 when London's index reshuffle takes effect on September 21, after its shares fell two-fifths over the past year. The gambling group leaves the blue-chip index more diversified than when it joined, even as regulatory pressure and a rising debt pile weigh on its valuation.
Entain drops to the FTSE 250
Betting and gaming group Entain is leaving London's FTSE 100 after six years, with its relegation to the FTSE 250 taking effect in the index reshuffle that begins September 21. Its shares have fallen by two-fifths over the past year, cutting its market capitalisation to just over £3bn.
That marks a steep fall from Entain's 2021 peak, when its stake in a US sportsbook helped draw a £16bn takeover offer from DraftKings. Since then, the Ladbrokes owner has gone through an acquisition spree, four chief executives, and clashes with activist shareholders.
More diversified, more indebted
Entain has also doubled its net debt to £3.6bn. It also reached a £585mn settlement with UK authorities over historical bribery allegations in Turkey. Yet the group now operates in about 30 jurisdictions, up from 20, spanning lotteries, casino games, horseracing, other sports, gaming machines and bingo.
Online gambling now accounts for three-quarters of revenues, up from three-fifths, while the number of betting shops has more than halved to 2,300. Ebitda last year was up two-thirds from 2019 levels. In June, chief executive Stella David announced the sale of a 20% stake in Entain's Polish and Croatian business for up to £366mn, alongside plans to divest the remaining 48% stake.
Regulatory risk still clouds the outlook
The UK government has shown itself ready to tax the industry when short of cash: last year an increase in online gaming duties led Entain to book a £488mn impairment charge. Its US sportsbook joint venture, BetMGM, could be a major source of growth, but state and federal watchdogs still disagree on how prediction markets should be regulated, a question that may ultimately need to be settled by the Supreme Court.
Berenberg analysts put a sum-of-the-parts valuation on Entain at £12 per share, more than double its current price. That theoretical value carries no weight with FTSE 100 index compilers, but it could interest Entain's more acquisitive rivals.
Source: Financial Times
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