The news has sent its shares tumbling 16% to 575p despite Alexander, who personally sold £13.7m worth of stock, reassuring investors they both remain ‘fully committed’ to the company.
Investors may be spooked by the chief executive’s comment that ‘while we continue at GVC, we will not reduce our holdings below current levels,’ potentially implying Alexander and Feldman may not stick around for too long – with the bits ‘while we continue’ being the most important.
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‘Mr Alexander reassures that he is “here for the long term” because his current plan will take at least three years to accomplish. The market is clearly confused as to why the pair have decided to sell down now if there is still value to be created,’ comments AJ Bell investment director Russ Mould.
GVC is not the only UK-listed gambling firm under pressure as shares in William Hill (WMH) and Paddy Power Betfair (PPB) have fallen more than 3% on reports the UK Government may introduce more regulation.
THE SIGNIFICANCE OF DIRECTOR DEALS
Director dealings can come under intense scrutiny as management have in-depth knowledge of the firm and so investors believe their buying or selling of shares can send an important signal as to the health of a business.
In some cases, management could be buying or selling shares to meet tax requirements or simply to take profit, but a large sale such as the one seen with GVC today sends a negative signal. Some critics might say: ‘If the directors of a business don’t want to keep their money invested, why should the public keep their shares as well?’
GVC recently revealed earnings hit the top end of its guidance in the year to December 2018 and it reported strong trading at the start of 2019.
While robust trading should offer some comfort to the market, regulatory concerns over the gambling sector have dragged on GVC’s share price, down 37.5% over the last year.
The UK Government has been keen to help protect problem gamblers, leading to a cut in the maximum stake on a single bet on fixed-odds betting terminals from £100 to £2.
GVC will be hit significantly when the new rules are enforced next month as it will drive up debt and result in the closure of up to 1,000 shops inherited through the acquisition of Ladbrokes.
The US is a potential opportunity for the company after sportsbetting legislation was loosened in 2018. However, it is still early days as individual states may take their time legalizing sportsbetting – if they choose to at all.