Summary

• To protect the gamblers and reduce harm, the SMF suggested a monthly spending cap of £23 a week or £100 a month.
• SMF suggested bringing tax related changes for overseas companies. This could pressurise them financially and could make them begin operations in the UK.
• Though several gambling company stocks were trading lower than their previous day’s close, the suggestions by SMF are yet to hurt them deeply.
• Online gambling has seen a significant rise in recent past.

Whether it is horse race and other sportsbooks, betting at the local betting shop or online casinos, and slots games, gambling has been very popular among the Britishers. The ease of accessibility and unique products available at online websites has increased the inclination towards online gambling. The cap on spending at £100 a month to protect the online gamblers from any potential harm, as suggested by the Social Market Foundation (SMF), is likely to impact the businesses of the companies operating in this industry. Below we discuss the details of the report by the SMF and also present the stock performance of some companies.

Highlights of the SMF report

In its efforts to protect the gamblers and reduce the harm caused by online gambling, the SMF has recommended a monthly spending cap of £23 a week or £100 a month. People willing to spend above this amount on gambling products would be required to prove that they could afford to lose the money without facing any adversity. Regarding the online slot games, it said that the stake limits should be set between £1 and £5. Instead of financial capping, there should be restrictions on the manners in which the non-slot online games are designed.

The limits announced by the SMF might not affect majority of the gamblers as they already spend less than the capped amount. However, the SMF emphasised that the new limits would protect players with lower incomes from any financial damage.

On the companies registered abroad, SMF stressed that revamping the manner in which they are taxed might pressurise them financially and they could start operations in the UK. There should be increased taxes on companies based at Gibraltar or the Isle of Man and reduced tax burden on companies that bring their operations in the country. The companies need to be assessed on the basis of minimum threshold for their capital, human, social, legal, and digital presence in the UK. Companies scoring low on these parameters should be charged with higher remote gaming duty and betting duty.

The SMF released its report ahead of a government review of the 2005 Gambling Act. The government had mentioned earlier that the act is not suitable for an era of online gambling.

Rise in online gambling

Over the past few years, British players have engaged themselves more in online gambling. As per the estimates from United Kingdom Gambling Commission, till September 2019, the industry’s worth was £14.3 billion. The online gambling showed an upward trend in offline betting amount. Online gaming companies have presented some unique products including generous deals and no deposit bonus, among others as compared to the physical shops. Increased interest of the gamblers in casino games and sports betting has added to the popularity of online gambling.

Online gambling emerged as a profitable pastime activity during the lockdown imposed to curb the spread of the coronavirus. During this period, the sportsbooks were hampered as leagues were put on break but the slots and bingo websites recorded a surge in activity. Stay-at-home orders, furlough scheme, and ease of playing on a smartphone have increased people’s interest in online gambling. There are around 400 games to choose from the British online casinos.

Stock performance of some companies

Below we present the stock performance by some companies after the SMF released its report.

Also Read:

A look at Pubs and Gambling Stocks Post Lockdown Relaxation

Popular Gaming Stocks of the United Kingdom

William Hill (LON:WMH): Based out of London and founded in 1934, it grew as one of the biggest and most well-known gambling companies. The company’s website provides various gambling related products for the players. While the betting side gives a chance to bet on countless sports related events, the casino side offers players slots, live casino games, poker, scratch cards, bingo, roulette, and jackpots, among various others.

On 6 August 2020, at 8.22 AM, the company’s stock was trading at GBX 124.40 down 2.51 per cent from previous day’s close at 127.60. The 52 week low high range was recorded as 36.70 and 205.20. With a market capitalization (Mcap) of £ 1,338.96 million, the stock provided a negative return on price, which was minus 34.68 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 862,106.

GVC Holdings plc (LON:GVC): GVC Holdings is a leading sports-betting and gaming company that operates both online and the retail sector. The Group owns several brands including both sports and gaming segments. While the sports brands are bwin, Coral, Crystalbet, Eurobet, Ladbrokes, Neds and Sportingbet, the gaming brands comprise of CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker and PartyCasino. The company has proprietary technology, B2C operations, and B2B service divisions. GVC Holdings has a joint-venture with MGM Resorts to capitalise on the sports-betting and gaming opportunity in the US. Incorporated in the Isle of Man, the company has licences in more than 20 countries, across five continents.

On 6 August 2020, at 8.50 AM, the company’s stock was trading at GBX 709.00 up 0.74 per cent from previous day’s close at 703.80. The 52 week low high range was recorded as 323.70 and 939.00. With a market capitalization (Mcap) of £4,107.03 million, the stock provided a negative return on price, which was minus 23.42 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 170,972.

Flutter Entertainment plc (LON:FLTR): Flutter is a global sports betting, gaming, and entertainment provider headquartered in Dublin. The company’s operations range from sports bookmaking to gaming, with exchanges, poker, fantasy sports, and B2B services. Flutter’s sports betting and gaming brands include Paddy Power, Betfair, FanDuel , FOX Bet , Sportsbet, TVG, Adjarabet, PokerStars, Full Tilt, Sky Betting, BetEasy, and Oddschecker.

On 6 August 2020, at 9.12 AM, the company’s stock was trading at GBX 11,820.00 down 0.25 per cent from previous day’s close at 11,850.00. The 52 week low high range was recorded as 5,512.00 and 11,850.00. With a market capitalization (Mcap) of £ 18,341.66 million, the stock provided a positive return on price, which was 25.40 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 22,243.

888 Holdings plc (LON:888): The Gibralter-based company founded in 1997 is a popular online gaming entertainment and solutions provider. The company has licenses in Gibraltar, the UK, Spain, Italy, Denmark, Ireland, Romania, Nevada, New Jersey, and Delaware. The company known for its proprietary gaming technology and associated platforms provides its players and B2B partners an innovative and world-class online gaming experience. While the B2C business is under the various 888 brands, the B2B is conducted through Dragonfish. Dragonfish provides the company’s partners with a platform to establish an online gaming presence and monetise their own brands.

On 6 August 2020, at 9.34 AM, the company’s stock was trading at GBX 186.00 down 2.92 per cent from previous day’s close at 191.60. The 52 week low high range was recorded as 70.70 and 201.50. With a market capitalization (Mcap) of £ 706.50 million, the stock provided a positive return on price, which was 15.84 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 26,811.

Conclusion

One of the many reasons both casual and professional gamblers opt for online gambling is increased trust developed in recent past on the companies and their websites. Apart from faith and unique products offered, there is a significant role of the industry regulator for safe online gambling. This has significantly increased demand for online casinos, innovative games, and products. While the suggestions on capping by SMF has not brought much of an immediate impact to the performance of the gambling stocks for now, but it is yet to be seen if the UK government actually accepts and implements the same. Therefore, it would be interesting to keep an eye on the sector when the government announces its review of the 2005 Gambling Act. The government had said that the review was postponed due to the coronavirus pandemic, and will soon be released. The government has shown its interests to make the act suitable for the digital environment and also protect the players against any risk.