GBGC spoke on a panel at the MannBenham Online Gaming Conference which discussed the topic of international regulatory creep in gambling. Across all gambling sectors in the last 18 months, GBGC has found more than 40 instances of increased regulation, the introduction of a licence ban or increased taxes. The trend for extra regulation shows no sign of slowing down.
One particular trend has been that of a tax on players’ winnings. Across the world, from Argentina, to Tanzania, to Russia, gamblers now face the prospect of losing some of their winnings in extra tax, especially for casino gaming and lotteries.
All of this regulatory creep has come at considerable cost to shareholder value.
Take Bwin as an example. Bwin merged with PartyGaming for GB£ 1.1 billion. PartyGaming was a FTSE 100 company and listed with a market cap of GB£ 4.6 billion. The passing of UIGEA in the US in 2006 destroyed the value of the business. Ultimately, Bwin.Party Digital Entertainment was sold for just GB£ 1.1billion to GVC Holdings.
GVC Holdings itself has spent GB£ 5.7 billion on acquisitions. In the first week of September 2019 GVC Holdings had a market capitalisation of GB£ 3.9 billion, a deficit on the acquisitions it has made of GB£ 1.8 billion.
Adding together all of the Bwin.Party and GVC Holdings’ acquisitions and deducting the current market capitalisation of GVC Holdings, GB£ 4 billion of shareholder value has disappeared over a fifteen-year period.
The loss has been due to a combination of regulatory change (e.g. UIGEA, FOBT restrictions) and increased taxation and compliance costs.
Management must bear some responsibility. But one cannot get away from the fundamental issue that gambling operators are trading in a difficult sector facing heavy political and regulatory pressures not only in the UK but in the rest of the world as well.