2023-06-16 12:05:52 ET
Entain plc ( OTCPK:GMVHF ) ADRs rose 2% after shareholder Eminence Capital called the sports betting company's recent plan to fund its acquisition of STS Holdings with an equity sale is "illogical."
Eminence Capital, which has a 2.1% stake in Entain and has been an investor since 2020, said it's "outraged" in light of the movement of the company's shares since the announcement about the deal was made on Tuesday, according to a letter Eminence wrote to the company's board on Friday.
The shares had dropped more than 8% before today since the announcement, representing over £650 million in lost market value, nearly the value of the price being paid for STS , Eminence highlighted.
The Entain board "has previously rejected multiple takeover approaches at materially higher prices on the grounds that those offers undervalued the company, but then turn around and issue equity at depressed prices for an asset that is at best a "nice to have" is illogical," Eminence CEO Ricky Sandler wrote in the letter.
"The market reaction to this equity offering should be a wake-up call to Entain’s tone deaf board and management team," Sandler added, saying that shareholders may now support a sale of the company to MGM ( MGM ) at a "materially lower price" than previously expected.
The news of the Eminence letter was first reported by Bloomberg.
Entain ( OTCPK:GMVHF ) turned down an all-stock takeover bid from MGM in January 2021, as well as a cash and stock offer from DraftKings ( DKNG ) in September 2021.
More on Entain/MGM
- Entain: MGM Resorts Should Acquire It Before BetMGM Impresses Public Markets
- Entain, Flutter, 888 Holdings seen as potential takeover targets after UK white paper
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Entain gains after investor calls funding for STS purchase `illogical'