Shares in Entain, the London-listed owner of Ladbrokes, have tumbled to their lowest point since 2020, sharply falling over 11.5 per cent on Monday.
The drop followed the company’s announcement of a decline in online net gaming revenue for both the third quarter and the full year.
Entain blamed this on a combination of regulatory challenges in the UK and sluggish growth in Australia and Italy.
The UK government’s recent gambling white paper introduced stringent measures to tackle problem gambling.
It included new restrictions on online stakes, intensified customer affordability checks, and a statutory levy on betting firms. But the toughened regulatory environment is having an impact which is lasting longer than initially expected.
“This means companies have to spend more on measures to mitigate problem gambling and that can lead to slower customer acquisition,” said Russ Mould, investment director at AJ Bell.
“The weak growth flagged in Australia and Italy also suggests people are not gambling as much or as frequently because cost-of-living pressures mean they have less in their pocket to fund a flutter,” he added.
To top it off, poor sports results have further dampened the company’s sports margins in September.
However, Entain chief executive Jette Nygaard-Andersen said the company was capitalising on opportunities in the United States through BetMGM, Entain’s sports-betting service.
It means the centre of gravity of gambling could shift over to the US where gambling is far less regulated than in the UK.
“The idea that Entain and other betting service providers, such as Flutter, would benefit as the US deregulates in the wake of 2018’s abolition of the Professional and Amateur Sports Betting Act and the UK moves to ever-tighter regulation, is a key reason why Entain and Flutter’s shares romped higher,” explained Mould.
Post-pandemic, shares in Flutter and Entain hit their respective peaks during February and September 2021.
Ivor Jones, research analyst at Peel Hunt, said: “The US — perhaps we should include Canada and say North America — is fast becoming the biggest regional market for domestically regulated online gambling.”
“The overall online gambling market includes companies which are not licensed in the place where there customers are. In relation to the UK it is not possible to say what the size of the overall market is.
“Some customers are simply spending less or stopping playing with companies like Entain. Others will be shifting their play to companies not licensed in the UK with different responsible gaming behaviour.”