Misread Finances: Not Understanding the GVC Holdings Stock Slide

This week’s leading example of junk financial reporting comes to us courtesy of the UK’s Independent, along with a healthy handful of poker-news outlets who’ve re-reported on a dip in GVC Holdings share price following its acquisition of moribund online-gambling operator bwin.party.

gvc-holdings-logoGVC won out over industry rival 888 Holdings in a months-long bidding war for bwin.party that culminated early this month in a £1.1 billion reverse takeover.  The GVC deal had to be slightly juicier because of the way it was constructed, with a higher stock-swap percentage involved.  What followed, as you’ll see, was wholly naturally and predictable, despite all the bre  “Fresh doubts over Bwin deal after GVC shares plunge,” screamed the Independent.  “GVC’s takeover offer is now almost identical in value to the one BwinParty rejected from the bigger bidder, 888.”

From there, the Independent piece goes on to show how, per the Independent’s own “calculations,” that the GVC deal isn’t so great after all.  As the Wind-Dependent tells us:

GVC’s shares have tumbled since its offer was accepted. As much of its bid was to be funded by BwinParty’s shareholders accepting GVC shares instead of cash, the whole value of its offer has sunk, too.

From valuing Bwin at 130p a share at the time of the bid, it has now fallen to just 116p. Meanwhile, shares in 888 have remained fairly steady, so its suggested cash and shares offer would still have been at the level of around 115p-116p which was rejected by Bwin.

Terming the GVC slide a “collapse,” the piece continued its markedly pro-888 slant by suggesting that it would have been much better for bwin.party to have accepted 888’s offer, because then bwin.party woukdn’t be broken up, as appears likely under the terms of the now-accepted GVC deal.

Other than for the purposes of meeting a news-reporting deadline, however, the truth of the tale is that whichever company won the bidding war for bwin.party was going to suffer a share-price hit as a result.  Worse, in terms of disguising the mechanics of GVC Holdings’ stock “collapse,” the Independent utterly fails to mention that the 15% slump in GVC’s price occurred almost entirely on September 3rd and 4th, the specific news cycle when it became publicly known that bwin.party would be switching sides and accepting the sweetened GVC bid over one from 888.

Here’s the proof, courtesy of the 30-day share-price ticker for GVC Holdings stock:

ScreenHunter_48 Sep. 25 11.06

Image source: Google Finance

Except for that little dip on September 9th, which was quickly recovered, GVC’s price has been remarkably balanced.  It’s important to understand that it’s bwin.party itself that’s the dead, rotting albatross in the whole affair.  No one could absorb that company without being prepared to lose some money in the process, and both GVC and 888 understood that going into the buyout negotiations.  After all, solid and highly profitable companies are seldom for sale; it’s usually the dumpster fires of the corporate world that end up on the selling block.

As for 888’s share price, in comparison, the Independent exhibits the same myopia.  “Meanwhile,” reads the same story, “shares in 888 have remained fairly steady, so its suggested cash and shares offer would still have been at the level of around 115p-116p which was rejected by Bwin.”

Well, no.  888’s own share price itself dipped when it looked like they’d be the ones getting bwin.party instead of GVC.  What 888’s shares have done is to hold steady or recover slightly amid general investor relief that they’re the ones not going to have to deal with trying to turn around years of bwin.party’s red ink.

To illustrate this, let’s compare the share prices of 888 and GVC over the last three months, which covers most of the period when the the two companies were waging their bidding war for bwin.party.

First, 888:

ScreenHunter_48 Sep. 25 11.15

And now, the same three-month period for GVC (these two images also via Google Finance):

ScreenHunter_48 Sep. 25 11.17

The two aren’t quite mirror images, but they clear show reverse-matching trends: Whoever was likeliest to be stuck with bwin.party at any given moment got to see its share price take a dive.  (That tells you a whole lot about the investment sector thinks about bwin.party, too.)

Anyhow, what the Independent produced — and what several poker news outlets dutifully copied — was a steaming pile of crap.  There’s been utterly no “collapse” of GVC Holdings’ stock price other than directly attributable to the company’s pending takeover of bwin.party.  Any stories claiming otherwise are false and misleading.


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  1. Anonymous

    So glad somebody wrote this. It’s hard to read crap like what the Independent read. Not only is what you’ve written far more accurate, but most m&a deals such as this have share price thresholds, beyond which there is an automatic share adjustment so the acquiree is protected against a major price collapse.


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