View from the City: Reflecting on GVC share sell-off
Paul Leyland at Regulus Partners analyses the impact of GVC’s executives selling off £16m of stock
The biggest share price reaction so far this year in gambling has not been caused by a market opening or closing, nor by strong results or a profit warning – not even by M&A. It has been caused by a CEO and chairman selling stock. When the chairman and CEO of GVC sold £16m of stock, the shares fell 14% (and showing no signs of recovering) – wiping around £700m off the value of the FTSE 100 company. Naturally, both stated they remained committed to staying with and growing the business, while a remaining holding of 666,666 shares for the CEO, having sold at £6.66, had people pointing to the devil’s work.
The sell-off demonstrates two things. First is the extent to which gambling companies, more than most stocks, rely on transparency and trust. The world of gambling is intricate and full of ‘surprises’ – given all that is going on at GVC (FOBT cuts, fiscal-regulatory risk, integration risk, even Brexit); if investors believe that senior management has less reason to be confident then many will run for the hills. That is not to say that Mr Feldman and Mr Alexander are less confident, only that investors are concerned that they might be.
Second is the extent to which a management team can shape a company. GVC is one group made up of a dozen separate entities stitched together mostly by the will of one man. This is hugely impressive, but if that one man appears to be in any way less committed, there is a clear fear the whole edifice may unravel. Business is not like politics – saying you are in it for the long haul usually means just that, rather than a signal for almost immediate exit. But in the highly political world of trying to second guess the future of gambling, fear and uncertainty are powerful motivators.