IGT online strategy slammed by Ader Group
Ader Management Group calls $500m Double Down acquisition "incredibly expensive" - says core slot manufacturer and sales business has been neglected.
One of IGT’s biggest shareholders has criticised the US gaming supplier for allegedly neglecting its core slot machine business in favour of investing in its online gaming strategy and allowing its share price to fall as a result.
In a letter to fellow IGT shareholders filed with the US Securities and Exchange Commission on Monday, Ader Management, led by analyst-turned-investor Jason Ader and former IGT chairman Charles Mathewson, claimed poor strategic decision making has led to the company’s share price falling by more than a fifth in the past three years.
Along with Mathewson and two others linked to New York-based investment firm Ader Management, Ader had put himself forward to join IGT’s board of directors before withdrawing his nomination earlier this month. IGT refused to support the nominations claiming Mathewson’s motivations for directorship are the result of his “long-running dispute” with IGT since his retirement in 2003.
Ader Management claims to own more than eight million shares of IGT common stock, or approximately 3% of total IGT shares.
Of primary concern in the letter were IGT’s “incredibly expensive” acquisition of social casino firm DoubleDown Interactive for up to $500m and an overall focus on online activities which has, in the letters words, led to the company’s core casino customers becoming “alienated”.
Ader wrote in the letter: “We believe the lack of focus by the incumbent board and the management team on your company’s core business has caused an unsustainable deterioration in the core business demonstrated by the company’s market share losses, degradation in customer relationships and loss of key employee talent.”
Ader also claimed that IGT’s board was lacking in gaming experience, adding that current CEO Patti Hart has overseen stock declines of 82%, 100% and 45.1% in previous companies.
He wrote: “Under current management and the incumbent board, IGT has repeatedly made decisions regarding the operations and strategic direction of your company that have negatively impacted shareholder value.”
In IGT’s Q1 figures released last week, DoubleDown Interactive helped the company post a 320% year-on-year rise in first quarter revenues from online operations, reporting revenues of $41.3m for the three months ended 31 December 2012 “ a 15% quarter-on-quarter rise.
Last month, however, saw IGT close its European-facing IGT Poker network, less than two years after inheriting it in a £70m acquisition of Entraction.