Betting Companies Share Prices Unmoved By New Gambling White Paper

The government finally released the long-awaited white paper into the betting industry yesterday. Amongst some of the suggestions that appeared in it are the notion that a maximum stake might be introduced to online slots, with a restriction put in place on how much people aged between 18 and 24 can bet in one go.

You can read about the white paper changes in more detail elsewhere on this site, but one of the questions that we asked in that piece is whether or not some of the suggestions made in it are likely to have an impact on the stock market.

There was a feeling in some quarters that a minimal movement on the share prices of the biggest gambling companies would mean that the white paper hadn’t gone far enough. The thought process was that the market not being overly skittish is a sign that those making their investments don’t think that betting companies are going to be overly affected by what has been announced in the white paper.

If, on the other hand, the shares took something of a dip, those that invest their money in gambling companies are worried about the long-term health of their investments.

How The Big Companies Share Prices Closed

The first thing to do is have a look at the biggest betting companies to see how they were looking when trading opened and closed on Thursday the 27th of April, which was when the white paper was released.

In terms of ‘big companies’, we’re talking about Paddy Power, Betfair, Ladbrokes, and 888 Holdings. Obviously Paddy Power and Betfair are part of the same company, Flutter Entertainment whilst Ladbrokes and Coral are both owned by Entain.

The reason we chose those three groups is that they are publicly listed, which the likes of Bet365 isn’t. That means that they don’t have share prices that we can look at in order to see how the markets have reacted.

Here is how they all faired over the course of the 27th:

In all cases there was a drop in the price of their share when compared to how the market opened, but none of the drops were particularly dramatic.

Entain lost 0.41% of its price, whilst it was 1.98% for Flutter Entertainment and 888 Holdings did slight better, with 0.55% being taken off its share price.

Even so, there will have been an expectation from many that the share price will have taken more of a hit on the day of the announcement if the white paper had been particularly bad for bookies.

What Happened Overnight

The interesting thing as far as we’re concerned is what happened overnight. Did the shares continue to drop or did they rally?

Here’s how it worked for each company we’re looking at:

The opening prices for Flutter and 888 Holdings showed a slight improvement, whilst there continued to be a dip for Entain. That suggest that the market isn’t too worried about the white paper, which critics of it are convinced means that the government hasn’t gone far enough with its potential reforms.

If the market is feeling relatively relaxed about everything, that is an indication that investors feel as though they’re going to continue making money from betting companies in the near future, which can be read to mean that the white paper is mild in its reform suggestions.

Evidence Of Harm ‘There To See’

Dr Matt Gaskell is the person responsible for running the National Health Service’s gambling clinics. He has written about the government white paper and declared that it ‘doesn’t go nearly far enough’. That is what the markets seem to be suggesting too, so it is interesting that someone on the front line of the NHS’s battle with gambling addiction is thinking the same thing.

He believes that it ‘will not do enough’ to stop patients turning up at the doors of the gambling clinics, ensuring that the ‘industry will carry on making huge profits while people are suffering and dying’.

Whilst that might be emotive language from Dr. Gaskell, there is no question that there have been suicides and deaths from gambling addiction. As he points out, the idea that affordability checks will be brought in if someone loses £1,000 in 24 hours isn’t much good when the average disposable income for households in the United Kingdom is £500 per month.

One of the biggest problems that Dr. Gaskell sees is people getting addicted to gambling via sports betting and bingo, at which point the are cross-sold ‘addictive online casino games’ they can play on their phones.

The white paper does nothing to address this issue. Though the paper does feature a discussion on the possibility of stake limits, Dr Gaskell is convinced that they need to be introduced at a maximum of £2 for everyone on online slots, with longer waiting times between spins. There is, he feels, a disconnect between what the government is saying about gambling and what it is suggesting doing about it.

It acknowledges that gambling is something that is harmful to health and needs to be regulated, but also seems to suggest that it’s just a ‘minority of flawed’ people that are at risk.

Though Dr. Gaskell obviously doesn’t mention the share price, it is interesting that the market seems to share his view. Ultimately, investors don’t necessarily care about the health or well-being of people that are engaged in gambling, they just care about whether they’ll make money.

The fact that the shares of the big gambling companies haven’t taken a nose-dive suggests that they think they’re going to be able to keep doing that, which means that the white paper is only really introducing cursory alterations to keep critics happy without having much of a genuine impact.