888 Holdings (LON:888) is a Betting and Gaming Company. It recently (July 2022) purchased William Hill, that it is struggling to digest (debt based purchase, so currently owes £1.4B). As well as William Hill, it also owns other big name gambling sites such as 888casino, 888sport, 888poker and Mr Green.

Whilst the debt is massive and will hold back growth, a lot (70%) of its interest payable is fixed rate and therefore not affected by recent rate rises. 30% is, however, and also a lot of its customers will also be affected with increasing mortgage rates. Will this affect turnover and Profit after interest? Undoubtedly.

The debt is, however, covered easily by net income from its activities (as of its last Report).

A couple of months ago, another Gaming Company, FS Gaming bought a 6% stake in 888 with a view (as it later transpires) to install its Directors onto the Board of 888. Longer term, perhaps the idea was to engineer a takeover from the inside. Who knows? Anyway, it put a rocket under the share price and it jumped by about 50% over the next month or so.

I held a significant number at the time and took the decision to take my money and run. Always good to take a profit. It then retreated back a fair way (about 40%) and I was pondering on a re-entry at some point. Luckily (as it turned out) the price started to climb back again, so I held off, knowing the Results were out fairly soon. I wanted a bit more certainty about current trading vs debt repayments before committing.

On Friday, out of the blue, 888 announced that it had been in discussion with FS Gaming about installing its Directors on to the Board, but it has come to light that one of the previous Businesses the Directors had been involved with was under investigation. Gaming Company Directors need to be whiter than white and the UK’s Gaming Commission was investigating this other Company, oh and at the same time it was reviewing 888’s Gaming licences. This is not good news. If 888’s licences are revoked, that’s 60% of its revenues gone in a flash, it will be unable to service its interest payments, the game will be up. 888 announced that it was immediately terminating all discussion as it sought to distance itself from FS Gaming staff.

Unsurprisingly the share price tanked 25%.

Where to from here?

Who knows?

If the Gaming Commission finds issue and revokes 888’s licence, it is toast

If FS Gaming increases its stake to over 10%, this will trigger a review, the licence will probably get revoked and 888 is toast.

If another Organisation takes a 10%+ stake and the Commission deems it unsafe, 888 is toast.

If FS maintains or sells off its stake and 888’s review is clean it will probably rocket again.

Personally I’m sitting it out until Results Day to see what that holds. I don’t have any spare cash currently anyway. I would have had to sell something else to buy in. If the results are not a disaster because of the interest rate double whammy, it might be worth a punt on 888 being given a clean Bill of Health.

In summary: It’s never wrong to take a profit and unexpected news, good or bad can come out of the blue. These can create buying and selling opportunities when Mr Market gets the pricing wrong. I got lucky in my buying and selling. I’m trying to not let that go to my head and am considering carefully whether to get back into 888.