Is now the time to invest in 888 shares?

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Is now the time to invest in 888 shares?

To say that this has been a bad year for 888 Holdings shares would be something of an understatement. True, the price did soar throughout most of 2021 but between September of that year and December 2022, it fell by around 75%. Since then it has plummeted again and stands at the lowest price since 2014. What exactly has happened and what should potential investors be looking for?

This has all came about following the suspension of some of the operator’s Middle East VIP accounts after a failure to adhere to the best practices for money laundering processes came to light. Around £50m is involved and this represents a small percentage – around 3% – of total revenue. Chief Executive Itai Pazner has added to the issues by quitting from his position.

However all isn’t all doom and gloom. The ongoing investigation is purely internal and there’s absolutely no reason to believe – at the time of writing – that this will result in any regulatory fallout. Nevertheless, potential investors should be aware that 888 Holdings has been the subject of financial penalties in the past, the UK Gambling Commission having fined them to the tune of £9.4m due to compliance failings last year.

888’s online revenue for 2022 was down overall by around 15% while there was a 5% fall for the closing three months of the year. A cost saving process includes redundancies from the Israeli operation.

888 acquired William Hill (non US operations) for around £1.95B in July 2022 and this has pushed the company’s debt to £1.8B gross. William Hill bookmakers are a global brand and one of the leading betting operators in the United Kingdom, having previously been owned by Caesars Entertainment who acquired them in April 2021.

The debt situation at 888 Holdings is the main area of concern right now as this could have an immediate impact on the company’s plans to boost cash flow and revenues. Following the William Hill acquisition, the focus now is on a successful integration of operations and a move to fully unlock the potential from the enlarged enterprise.

While the 888 share price remains low and some investors could be tempted to jump in, full-year results are due in a few weeks’ time and close scrutiny would be the wise move here. The main concern here is the debt situation and the potential risk of action being taken, however UK regulators have made no comments on recent events and our advice here would be to take advantage of the situation and cautiously dip a toe in the water.

At the time of writing, the 888 Holdings share price is 71.60 (as of 14:00 on 22nd February, 2023). This is slightly down on the previous close of 72.20.