The coronavirus outbreak has decimated UK betting stocks following the cancellation and postponement of several sporting events. I invested in a number of betting companies to take advantage of the changes in US regulation and the opening up of sports books across several states. I’d already been a holder of Paddy Power Betfair (now known as Flutter) since February 2018 and later added GVC in October 2018 on the basis of its Ladbrokes acquisition. The Ladbrokes purchase was effectively structured as a bet itself based on the outcome of the government’s review on fixed odds betting terminals. My calculus on this was wrong and GVC subsequently fell in share price once the deal had gone through. I nevertheless dug myself out of a hole by averaging down and was sitting on a nice profit before coronavirus hit.
Consolidating my positions in both GVC and Flutter had reduced my risk and I later added William Hill in April 2019 and The Stars Group. William Hill had already developed it’s US business in Nevada and I felt it was strongly placed. The Stars Group had purchased Sky Bet which I felt bolstered its poker offering and put it in a good position for sports betting. Therefore the merger of Flutter and The Stars Group was a welcome development and I trimmed my positions in both to take some profit. The only position I hadn’t consolidated was William Hill. It’s shares have been like a seesaw over the past year.
That takes us to today and the coronavirus. All of the bookmakers have been whacked by the cancellation of sporting events. Flutter, GVC and William Hill have all put out updates, giving their estimations of the financial impact. They highlight that some horseracing is continuing behind closed doors and emphasise the size of their sports books in relation to other parts of their business. However, it’s not just that a lack of sporting events means a lack of betting. The potential economic uncertainty surrounding the coronavirus pandemic means that even once sporting events start to recover from the virus, punters may be cautious about fluttering away their disposable income and there may be more restrictions on betting shops remaining open. It’s for those reasons that I’ve been drastic and cut my exposure considerably, taking losses for both GVC and William Hill. I’ve held on to Flutter and The Stars Group for a few reasons – their merger is impending, Flutter isn’t highly leveraged unlike GVC and William Hill, and The Stars Group could benefit from people staying at home during coronavirus and playing more poker.
Breakdown of my positions:
- GVC average price – 532.86p sold at 381p
- William Hill average price – 156.55p, sold at 60p
I couldn’t risk these falling further and in hindsight should maybe have not let them run the last few days. But I still got out with half a ripped shirt and will be monitoring for an entry point when the coronavirus threat has passed. People will always want to have a bet and the US opportunity remains in play for the long term. This crisis might shake up some of the current players though.
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