Southeast Asia News Desk

(AsiaGameHub) –   Entain faced further stock market woes today following confirmation that a major shareholder, Eminence Capital, is closing after 27 years. 

Around 12:20 GMT, shares in the LSE-listed company fell 7.04% to 557.4p, as investors reacted to the potential share overhang from the hedge fund’s impending exit. 

Founded by Ricky Sandler, Eminence is believed to own approximately 6.5% of Entain, ranking as its third-largest investor after Capital Group and Dodge & Cox. 

The worry for the market is that Eminence will need to sell its holdings as it liquidates and returns money to clients, creating the risk of ongoing selling pressure on Entain’s stock in the short term.

In a client letter, Sandler confirmed the shutdown of the New York fund he started in the late 1990s, pointing to poor performance, higher costs, and tougher market dynamics. 

The firm, which manages about $6bn (£4.42m), plans to return at least 75% of investor capital by mid-to-late June as part of a structured closure.

“In recent years, applying our disciplined bottom-up investment approach to fast-changing markets and an evolving structure has grown increasingly hard,” Sandler wrote in a letter obtained by Bloomberg. 

“We feel we have not met our own lofty standards or your expectations in recent times.

“I have immense pride in the Eminence team, the business and culture we created, and the quality of our investors.

“The firm has been much more than just a career to me. It has been a central part of my life.”

Eminence has struggled with performance for an extended period, even though its disclosed portfolio contained notable names like Amazon and Salesforce, which comprised a significant 10% portion. 

Entain may not be the only casualty of Eminence’s shutdown

Reports indicate the fund also has a minor stake in Flutter Entertainment and roughly 8.43 million shares, worth about $290m, in another prominent US gambling firm, DraftKings. 

Eminence’s closure has not negatively affected Flutter’s share price in London, where its stock is up 1.5% today to 8,244p. However, observers are cautious about the potential impact on DraftKings, considering Entain’s sharp decline. 

DraftKings, traded on the NYSE at $23.18 per share, has received a ‘Strong Sell’ rating from one analyst. Others remain hopeful that excitement around prediction markets will aid the company following its launch of DraftKings Predictions. 

It became the second major US betting operator to introduce a predictions platform, after Fanatics, and pipped its key rival FanDuel – owned by Flutter – to the post.

Beyond prediction markets, all three companies have endured a difficult year on the markets. Entain’s shares have fallen over 10% in London in the past 12 months, while Flutter is down more than 50% on the NYSE and DraftKings has declined 30% on the NASDAQ Global Select Market (New York). 

Entain also confronts a tougher operating environment in its home UK market, with rising taxes and a growing black market worrying both the regulated sector and the government. 

A voluntary ban on front-of-shirt sponsorships in the English Premier League starts next year. CEO Stella David has advocated for a full sponsorship ban on unlicensed operators, whose branding is prevalent on shirts and in stadiums.

A persistent downturn in UK and Irish retail has also hurt the company, prompting plans to close a significant number of its Irish Ladbrokes shops to reduce costs.

Nevertheless, its first-quarter revenue rose 3%, with online revenue in the UK and Ireland exceeding forecasts with 13% growth. This offers a glimmer of hope for the FTSE 100 member, which has a market capitalisation of approximately £3.6bn. 

Yet the shutdown of Eminence has inflicted another setback on Entain, and the market will watch closely for any effect on DraftKings during a period when gambling firms worldwide have been under pressure.