Playtech share price dives 26% after Eddie Jordan group withdraws

Shares of online gaming tech and financial services company Playtech plc (LON:PTEC) traded down by 26% on Friday, after news broke that a competing bid for the company from JKO Play was not going to happen.

Before markets opened on Friday, JKO Play – set up by former Formula 1 owner Eddie Jordan and ex Ladbrokes executive Keith O’Loughlin as a vehicle to look at buying Playtech – issued a brief statement that they do not intend to make a formal offer for Playtech.

Some brief background… soon after coming to an agreement to sell its Financials division Finalto for $250 million to Hong Kong based Gopher Investments, Playtech came to an agreement with Australia gaming company Aristocrat Leisure Ltd (ASX:ALL) to be acquired by Aristocrat for £2.1 billion (USD $2.85 billion), in cash. The Aristocrat offer, unveiled in mid October, is for 680p per Playtech share.

About a month later, JKO Play approached Playtech about making a (potential) competing bid, and was provided with access to due diligence information. With a February 2 Playtech shareholder vote on the Aristocrat offer looming, JKO Play was under some time pressure to decide whether or not to come forward with a formal bid.

Interestingly, Playtech shares didn’t really move up by that much in mid November when news of JKO’s interest was made public (see graph below). Playtech shares had already popped when the original Aristocrat deal was announced in mid October – the shares were at about 430p before the deal was unveiled, and moved right up to 741p by the time JKO Play first came forward. The fact that Playtech was trading almost 10% above Aristocrat’s offer price means that Playtech shareholders were betting (no pun intended) on a higher price emerging, either from Aristocrat or from a competing third party.

With JKO Play now out of the picture, and no other bidder emerging, Playtech shares have lost 26% of their value today, sitting as at the time of writing early Friday afternoon GMT time at 543p – more than 20% below Aristocrat’s offer.

We’d also note that there has been a lot of buying and selling of Playtech stock among the company’s large institutional shareholders over the past few weeks, with some institutions buying in, and some getting out. For example New York based SpringOwl Asset Management, run by former Bear Stearns gaming analyst Jason Ader, sold down most of its position since mid October, from 10.7 million PTEC shares down to 2.4 million shares as of January 19. UK based Boussard & Gavaudan Investment Management held 8.3 million PTEC shares, sold down about half of them during Q4, but then bought back in during the first few trading days of January 2022 to now hold 8.7 million shares.

We had previously reported that Schroders plc (LON:SDR), via its Schroder Investment Management unit, sold its 10.8 million PTEC share holding soon after the Aristocrat deal was announced.

Why would Playtech shares trade so far below the Aristocrat 680p offer?

Well it would seem that traders are now worried that the deal will not go ahead, either because it gets turned down by Playtech shareholders (remember, Playtech shareholders rejected the company’s original plans to sell Finalto, but later approved a higher offer), or because regulatory approval of Aristocrat gets delayed or even rejected. As we note above, PTEC shares were at about 430p before the Aristocrat deal was first announced, and might move back to that range if the sale doesn’t go ahead.