Why has the Betmakers (ASX:BET) share price plunged 24% since Friday?

We look at the market reaction in the wake of Betmakers proposal to take over Tabcorp.

| More on:
A man holds his head and look in horror at a betting slip, indicating share price drop on the ASX market

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

 

Shares in Betmakers Technology Group Ltd (ASX: BET) plummeted 24% since the company announced its interest in acquiring the Tabcorp Holdings Limited (ASX: TAH) Wagering and Media business on Friday.

The Betmakers share price has gained some lost ground this morning, and is now trading at $1.14, up 2.7% today.

What's the plan?

According to Betmakers' indicative proposal, Tabcorp would receive $1 billion in cash and $3 billion in BetMakers shares. The number of shares on offer has not been determined. Once the initial cash payment is made, the remainder would be determined when the deal was signed and priced at a 15% premium to the traded price. 

As it now stands, the sudden decrease in the Betmakers share price would mean Betmakers would likely have to issue more shares to fund the deal.

We take a look at the market reaction.

'Proceed with caution', commentators say

Gabriel Radzyminski from investment firm Sandon Capital questioned the value Betmakers would bring to Tabcorp. In an interview on Friday with the Australian Financial Review (AFR), he urged Tabcorp shareholders to consider that the value of the Betmakers share price may not reflect the true value of the company.

The reality is with a company at the stage of BetMakers' development, that is a challenging assessment for Tabcorp shareholders to make.

Matt Williams, portfolio manager at Tabcorp shareholder Airlie Funds Management, also urged shareholders to evaluate the Betmakers share price.

In an interview with the Sydney Morning Herald (SMH), Williams asked stakeholders to consider whether they thought BetMakers' shares were fairly valued.

A headline in the AFR today described the Betmakers takeover proposal as 'audacious'. The article referred to the degree of difficulty for a small company with a market capitalisation of $897.54 million to digest the much larger Tabcorp, which has a market cap of $11.35 billion.

The bull case 

The architect of the deal is Betmakers CEO Matt Trip. He cites many opportunities for Tabcorp shareholders, one being Betmakers' growing presence in international markets. Tripp said in Friday's release:

Building on BetMakers' success to date, the combined entity would be a compelling investment proposition as one of the most broadly deployed global racing networks in the market. We are uniquely placed to pursue commercial opportunities globally, and in particular, in the United States.

According to the proposal, Tripp also promises a technology upgrade that would introduce a second brand to allow punters to bet in sports instead of just horse racing. According to Tripp, this would revive Tabcorp's wagering arm.

Tripp has had the runs on the board when it comes to the wagering industry, having helped turn Sportsbet into the country's second largest bookmaker behind Tabcorp and then partnered with Crown Resorts to set up Bet Easy.

"I am happy with the bid and where we've landed. It's a real win for shareholders every way I look at it," he told AFR Weekend.

Tabcorp has acknowledged the proposal, but has yet to respond.

Frank Tzimus has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Betmakers Technology Group Ltd. The Motley Fool Australia has recommended Betmakers Technology Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Accent, Cettire, Ioneer, and Pro Medicus shares are dropping today

These shares are ending the week in the red. What's going on?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Betmakers, Cettire, Johns Lyng, and Vulcan shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Austal, Beach Energy, Perseus, and Platinum shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Coronado Global, Genesis Minerals, Monash IVF, and Platinum shares are sinking today

These shares are starting the week in the red. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Dateline, DroneShield, Ora Banda, and Pilbara Minerals shares are dropping today

These shares are ending the week in the red. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Qantas, Resimac, Tyro, and Soul Patts shares are falling today

These shares are having a tough session today. But why?

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why Betr, Evolution, NIB, and West African Resources shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Elders, IDP Education, Life360, and Pilbara Minerals shares are falling today

Let's see why investors are selling these shares.

Read more »