Intertain hits back after shares plummet 20%Â
Canadian operator reassures investors after damning report published yesterday led to trading of its shares being suspended
Intertain has moved to reassure investors after a damning report into its strategy and financial management led to 20% being wiped off its share price and trading suspended yesterday. [private]
The 120-page report, published by New York hedge fund Spruce Point Capital, raises numerous questions over Intertainâs acquisitions of Mandalay Media, Vera&John, and Gamesysâ Jackpotjoy brands, as well as the firmâs corporate governance.
In a statement, Intertain said the report was âmisleading and self-servingâ and that it âstands behind the integrityâ of its public disclosures. The firm also said Spruce Point was a short seller of its shares, and stood to ârealize significant gainsâ in the event its share price fell.
The report provides an overview of the Intertain business and makes allegations over the background on key management figures including chief exec John FitzGerald (pictured), CFO Keith Laslop and Darren Rennick, president of its Bahamas subsidiary.
Spruce Point described Intertainâs £425m acquisition of Gamesysâ Jackpotjoy, Botemania and Starspins brands as having âmore holes than Swiss Cheeseâ raising particular concerns over the licensing and earn-out agreements that formed part of the deal.
âWhy would Intertain acquire a business where costs will increase significantly on the initiation of a new industry tax [Point of Consumption in the UK],â the report stated.
âThey acquire none of the underlying technology (just brands and player data) and have to pay large on-going fees and an earn-out that could almost reach the large up-front acquisition price tag.â
The report also alleged that Intertain has not set aside funds to cover upcoming earn-outs from its earlier acquisition of Mandalay Media and Vera&John, and was particularly critical of Intertainâs management incentive plan.
In its response, Intertain said it has established a committee of non-management directors to closely review the allegations contained in the report. âFollowing that review, the company will take any and all actions necessary and appropriate to protect the interests of the company and its shareholders,â Intertain added.
Intertainâs share price was down 20% to CA$9.86Â when markets closed yesterday.