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Playtech’s plans to fund further acquisitions dogged by scandal

Tom Lasten 29 June 2015 - 11:16:13

Online casino software giants Playtech have just announced plans to raise funds to acquire struggling trading firm Plus500. Recently, the company which provides the likes of Ladbrokes and William Hill with online casino solutions, moved into the trading sector through the acquisition of TradeFX in April of 2015.

Now Playtech is selling 29 million shares, which works out at around 9.9% of its total shares, in the hope of raising £250 million to buy the troubled firm and possibly one more undisclosed company. Its founder Teddy Sagi is buying 33.6% of the new shares through his investment company Brickington, Sagi already owns a 33.6% share in Playtech.

A deal surrounded by controversy

Last month Plus500’s share prices went into a downward spiral after a caution from the UK financial regulators who deemed that their anti-money laundering procedures were out of line with the guidelines set forth by the regulatory board. On top of this the company allowed people to make risky bets on stock and currencies and as a result had to freeze thousands of UK accounts in the wake of the regulators’ review.

“As both companies are Israeli owned, the deal could fall under the jurisdiction of Israeli law which requires only 50.1% of all shareholders to consent either way”.

Playtech’s move has proved quite a controversial one. Hedge fund Odey Asset management, headed up by City of London guru Crispin Odey, called the offer ‘an opportunistic bid’ and claimed Playtech were trying to ‘exploit current regulatory issues’. As it stands Odey is sitting on 25% of Plus500 shares and plans to veto any bids. As both companies are Israeli owned the deal could fall under the jurisdiction of Israeli law which requires only 50.1% of all shareholders to consent either way. With Plus500’s management, who currently own 35% of its total shares, already approving the deal, they would need only 15% more votes to actually push the deal through.

Share prices under scrutiny

In the days following the announcement of Plus500’s account freezes, investment house Cable Car Capital published a blog post which questioned the validity of the current share price. The San Francisco firm claimed that shares should be worth $1.10 each, a huge difference from the current quote of $6. Before the crisis Plus500’s share price sat at around $11.50 and now both investors and analysts are divided on what should be the actual share price in this current case, with some quoting $7.50 and others going as low as $0.80.

Customers left in limbo

Financial guru Crispin Odey plans to veto any bids for Plus500.

Perhaps the biggest concern amidst the whole controversy is the effect that this has had on Plus500’s customers. News of account freezes broke in May 2015 and at the time nobody was notified, with customers only realizing there was a problem when they went online to trade. Some had their accounts frozen for more than 2 weeks and many complained that the company was faceless and as such they we’re unable to get in contact with them to find out any information.

Some customers found that they were unable to withdraw their funds even after the accounts were unfrozen, stating they received a message via the operator’s platform saying that their account was under review. Spokespersons for Plus500 refused to comment on any individual cases at the time but later went on to claim ‘Human Error’ as the root cause of the crisis.

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