A US-based hedge fund has taken a 6.1% stake in UK-listed online gambling operator Bwin.party digital entertainment, prompting speculation that a major restructuring of the company is in order. The New York-based SpringOwl investment vehicle says it has reached an agreement in principle to acquire the stake from PartyGaming founders Ruth Parasol Deleon and James Russell Deleon, who were more or less forced to shed their combined 14% Bwin.party stake in October so that the company could be deemed suitable for a New Jersey online gambling license.
The deal will also allow SpringOwl a spot on Bwin.party’s board of directors, which has prompted the restructuring talk. Rumors spread last July that Bwin.party was contemplating splitting into two companies: one to serve regulated markets while the other would serve ‘grey’ markets. Last April, Bwin.party made the fateful decision to cease marketing in 18 ‘grey’ countries, which only accelerated the company’s already declining revenue trends. Other potential splits could include cleaving off the US-facing part of the business into a separate entity that would move into new states as the pace of regulation allows.
SpringOwl was born last year when Ader Investment Management teamed up with Cumberland Associates. Jason Ader (pictured) featured largely in 2013’s proxy fight at International Gaming Technology and one of Ader’s chief problems with IGT CEO Patti Hart was her decision to get into social gaming and online gambling, which Ader saw as a distraction from IGT’s core legacy operations.
Ader also sits on the board of casino operator Las Vegas Sands and has characterized online gambling as “the single worst threat to land-based casinos” he’s seen in over two decades, suggesting this is all a covert plot by Sheldon Adelson to gain control of New Jersey’s market-leading online gambling company with the intention of running it into the ground. (Daffy, yes, but if Adelson’s minions can routinely reference poker-playing Al Qaeda members, we shouldn’t scrimp on our own conspiracy theories.)
Bwin.party’s board reportedly learned of SpringOwl’s purchase last week and the sale will be finalized within two weeks. News of SpringOwl’s interest did more to pump up Bwin.party’s lagging stock than revenue results from New Jersey, with shares rising 5.3% to close Tuesday’s trading at 119p. It would be the height of irony if Bwin.party investors’ salvation lay in the breakup of the company’s component parts to ‘release their value,’ given that the whole point of the ill-advised merger that bolted this unwieldy behemoth together three years ago was supposed to make the sum greater than its individual pieces. If only someone would have warned us of the dangers…