Investors were not informed transparently
The reason for the class action lawsuit against Entain will be an alleged “failure to provide honest reporting” [Article on English], as reported by the British Mirror. Specifically, the lawsuit targets Entain's UMGAng with a Turkish subsidiary of the Entain brand Ladbrokes, which is guilty of failing to prevent corruption.
Entain had to pay a record fine of GBO 585 million to the British tax authorities last year, even though the subsidiary had already been sold in 2017. As a result, the stock price collapsed and CEO Jette Nygaard-Andersen resigned.
Andrew Hill, partner at Fox Williams, emphasized that the intended lawsuit should not only have financial compensation, but also have a symbolic effect:
This lawsuit offers institutional investors an opportunity to recover significant losses, but also aims to improve transparency and governance in the UK gambling sector and remind listed companies of the need to take their disclosure obligations seriously. – Andrew Hill, Partner at Fox Willaims, Source: The Guardian
Hill also appealed for listed companies to understand that they have an obligation to be transparent towards their investors. In this respect, the lawsuit against Entain appears to be of overriding importance.
Entain is facing consolidation
According to experts and internal reports, the resignation of Jette Nygaard-Andersen as CEO of Entain ended an era for the group that was characterized by a massive expansion policy. Stella David took over as interim CEO.
Entain has now withdrawn from unregulated markets and emphasizes that its operating business is fundamentally profitable despite high losses in the previous year.
Whenever there are allegations, Entain seems to point out that they are “legacies” from the past. It remains to be seen whether Entain can put the scandals of the past behind him or whether there will be further revelations in the future that could lead to fines.
Entain denies class action lawsuit
A spokesman for Entain has so far denied that the gaming group was being sued by its investors. If this were the case, Entain would be willing to “vigorously” defend himself against the allegations.
Entain's share price nevertheless fell by several percentage points during the averaging process and is currently valued at less than 0 AUDAround three years ago, the company was worth more than three times as much on the stock exchange.
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