Gambling giant Entain has seen its share price fall by over 20 per cent over the last year, as its legal problems continue to cause a headache for the group.
“Entain has been on a losing streak for some time,” Dan Coatsworth, investment analyst at AJ Bell, told City AM, namely “dealing with a bribery investigation and allegations that it overpaid for acquisitions which haven’t lived up to expectations.”
The London-listed group behind Coral and Ladbrokes caused a media frenzy in November 2023 when the Crown Prosecution Service (CPS) entered into a deferred prosecution agreement (DPA) with the group to settle a HMRC investigation.
DPAs involve a company reaching an agreement with a prosecutor. In these agreements, the company is charged with a criminal offence, but proceedings are automatically suspended after the company agrees to a number of conditions.
HMRC’s probe into Entain’s Turkish-facing business, which it sold in 2017, was over alleged bribery offences that occurred between July 2011 and December 2017.
As part of the DPA, Entain agreed to pay £585m in penalties and disgorge profits, £20m to charity, and £10m to cover HMRC’s legal costs.
As set out in the Crown Court judgment, Entain was said to have provided “significant co-operation to the investigation.”
The group was said to have made a “wholesale change of senior management and approach” while also acknowledging “it was necessary to overhaul its culture and practices”.
But the DPA didn’t end this headache for Entain.
Civil problems
A fresh suit came earlier this month when the group’s former CEO, Kenny Alexander, and former chairman, Lee Feldman, filed a lawsuit against the group and law firm Addleshaw Goddard.
Addleshaw Goddard advised Entain on a range of legal matters, including on its DPA.
The former bosses instructed Quillon Law for their case. According to their particulars of claim, seen by City AM, Entain and Addleshaw are alleged to have potentially disclose privileged information to HMRC, the CPS, the Director of Public Prosecutions (DPP) or other third parties without obtaining their consent.
They are seeking a court order that would enable them to see what information was shared with prosecutors and what materials may have been disclosed.
A spokesperson for Alexander and Feldman said: “Addleshaw Goddard were the claimants’ longtime advisers during the time they built and managed the Entain business and advised them on all material legal issues in connection with Entain’s operations.”
“[Alexander and Feldman] are concerned that crucial advice given by Addleshaw Goddard may have been withheld, purportedly on privilege grounds.”
“[Alexander and Feldman] are determined to get to the truth of what has gone on here, hence their decision to force full disclosure from Addleshaw Goddard and Entain through this claim,” they added.
Addleshaw said in a statement that the firm was “unable to comment due to the client confidentiality obligations we are subject to”, while a spokesperson for Entain said it “considers the claim to be without merit and it will contest it robustly.”
Both Feldman and Alexander have also filed a separate claim last October against the Gambling Commission over misuse of private information. According to trade publication CDC Gambling, Alexander and Feldman made allegations of breach of privacy over the Commission’s handling of the 888 license review.
Last August, law firm Fox Williams launched a group claim against the gambling giant.
The claim stems from when the news broke that Entain signed a DPA as its share price dropped in value. Fox Williams partners Andrew Hill and Matthew Reach claim Entain’s failure to “report honestly to investors regarding its knowledge of bribery and corruption in Turkey”.
The claimants filed their claim form, and according to a timetable issued by the High Court, they need to issue their particulars of claim by next month, which Hill told City AM “is all guns blazing”.
Speaking last August, a spokesperson for Entain said it “is not aware of any issued claim of this kind against the company. We would defend any such action robustly.”
The DPA ended the criminal probe into Entain. But last year it was reported that the CPS was offering plea discussions with several suspects from Entain as it prepared to make charging decisions against individuals by the end of 2024.
The CPS doesn’t comment on live investigations.
While in a separate matter, the Australian Transaction Reports and Analysis Centre (AUSTRAC) revealed in December it took legal action against Entain Australia for failing to meet anti-money laundering (AML) and counter-terrorism financing requirements.
Speaking at the time, the group said, “we have co-operated fully with AUSTRAC throughout its investigation and we are implementing further enhancements to Entain Australia’s AML and CTF compliance arrangements.”
Problems at the top table
While all of this is happening, its CEO surprised the market earlier this month to announce he left the job “by mutual agreement” and with immediate effect.
Gavin Isaacs served just 161 days in the senior position.
Commenting at the time, AJ Bell investment director Russ Mould said, “something must have gone seriously wrong.”
Entain said its non-executive chair, Stella David, took over the leadership role until a permanent person was chosen. He was previously interim CEO between December 2023 and September 2024.
He lasted less time than Shay Segev did in 2021, who left the chief executive position after just seven months in favour of the sports streaming platform DAZN.
Coatsworth noted, “the revolving door with management suggests there are tensions in the boardroom”.
“It’s not a good look and the miserable share price performance would suggest that many shareholders have had enough and sold out,” he added.
In the background the accountancy watchdog revealed last month that it launched an investigation into Big Four firm KPMG over its audit of Entain.
This probe relates to KPMG’s audit of the group’s consolidated financial statements for the year ended 31 December 2022.
Entain is set to announce its full-year 2024 financial results next Thursday.
Earlier this month, the group informed shareholders it was pleased with the group’s performance in 2024 and trading so far this year. It added that its EBITDA is expected to be at the top of the £1,040m-£1,090m guidance range.
Eyes on the Law is a weekly column by Maria Ward-Brennan focused on the legal sector.