Tabcorp (ASX:TAH) share price slips after systems failure

The Tabcorp share price soared on Friday, only to be pulled down this morning after a serious IT outage affecting a major racing day.

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Tabcorp Holdings Limited (ASX: TAH) was up 16% last Friday on rumours of takeover interest by two large US private equity firms. This week, however, the Tabcorp share price has slipped slightly after a failure of wagering systems. 

Why is the Tabcorp share price slipping?

Tabcorp experienced an outage of its wagering operations and systems from around 11.30am AEDT on Saturday. This is one of the largest betting days in the annual racing calendar. It features the Mackinnon Stakes day in Melbourne and Golden Gift day in Sydney. 

In an update, Tabcorp advised that its systems were "largely" restored. 

The company blamed a "smoke and likely fire incident" at a third-party managed data centre in Sydney. Consequently, it has suffered extensive damage to its servers and associated infrastructure. The company placed its potential losses at "less than $10 million" of earnings before interest, tax, depreciation and amortisation (EBITDA).

Management response

Tabcorp managing director and CEO, David Attenborough apologised for the outage, saying it was unacceptable:

Tabcorp remains deeply sorry for this and acknowledges the significant disruption caused to our customers, the racing industry and venue partners.

Racing Victoria chief executive Giles Thompson said:

We'll be seeking a clear and frank explanation from Tabcorp on how this has happened and what they will be doing to ensure that it doesn't occur again.

It's incredibly disappointing and frustrating for this TAB outage to occur on a major Group 1 race day, in particular for the punters who were looking forward to a great Stakes Day program at Flemington.

Other pressures

There are other pressures on the company at the moment. The Australian reports that shareholders are pushing for a demerger of the wagering and lotteries businesses. In addition, the company agitation over performance from a group led by Perpetual Limited (ASX: PPT). And finally Mr Attenborough, the CEO, is planning to leave the company in the first half of 2021.  

The Australian has also revealed the Victorian state government has been sounding out rival bookmakers ahead of a formal tender process. Regardless, Tabcorp retains exclusive access to pubs and racetracks until 2024.

The Tabcorp share price dropped sharply in opening trade today but has somewhat recovered and is trading at $4.02, down 1.95%, at the time of writing.

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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