Paddy Power slumps on concerns over UK government review

Shares in Irish bookmaker Paddy Power Betfair fell 3.77 per cent to €80.40 in Dublin on Tuesday on the back of concerns surrounding a UK government review of fixed odds betting terminals (FOBTs).

The gambling giant, led by Peter Jackson, also fell on its London listing by 4.85 per cent.

The bookmaker’s Irish share price drop on Tuesday, wiping about €206 million of its market capitalisation, was more than triple the fall of Ireland’s benchmark index. However, the trading average for the stock was also more than triple the 20-day moving average.

Paddy Power’s fall, the biggest for any stock on the Iseq overall index since March 7th, wasn’t quite as pronounced as that in UK betting companies.

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Shares in William Hill were down 12.7 per cent by the close of business among investor concerns that more increases in gaming taxes in the UK may be on the way.

A report from the Times of London newspaper suggested that the UK treasury had accepted a cut in the maximum FOBT stake to £2, meaning the market is likely to start pricing in such an outcome, Davy analyst David Jennings said in a note.

Mr Jennings flagged a suggestion that “one way the UK government could make up any tax shortfall arising from FOBT staking changes would be to increase taxes online.

‘Crack cocaine’ of gambling

“It may well be that the government feels that it has impacted the earnings of these operators enough and will try to source tax revenues from other parts of the gaming industry,” he added.

FOBTs have been described as the "crack cocaine" of gambling, with the culture secretary, Matt Hancock, also thought to be supportive of the £2 figure. A final decision is thought to be weeks away.

John White, boss of Bacta, the trade association for the UK's amusement and gaming machine industry, said: "While the final decision is yet to be made, Mr Hammond's recognition of the vital need for £2 aligns the Treasury's view with that of the DCMS (department for digital, culture, media and sport), Bacta, the public, cross-party MPs, faith groups and countless other stakeholders.

Appease worries

“New analysis from the Centre for Economics and Business Research should also appease any further worries of the Treasury and the bookmakers.

“It demonstrates their rude health, with revenues and profits consistently on the rise, and major growth on other fronts beyond FOBTs.”

GVC Holdings also sank following its recent takeover of bookmaker Ladbrokes Coral.

Paddy Power Betfair’s decline was more muted due to the company’s lesser reliance on betting shops. – Additional reporting, Bloomberg and PA