GVC Holdings - A second casino games provider pulls out of Germany; is regulatory risk there being properly priced in?

Davy Research
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Yesterday (January 11th), we learned that a second large online casino games provider, Novomatic, has written to all its licensees to say that it will no longer permit them to offer their games in Germany. This follows a similar move by Gauselmann last November. Both are responding to a German Federal Court ruling last October that seems to have deemed a ban on online casino to be constitutional. While the market barely reacted at the time, we feel it raises the risk in Germany that a ban could be enforced in the future. The 16 state prime ministers are due to meet to discuss German online gambling law in February – their first meeting on the subject since the court ruling. While we have no way of knowing what they will ultimately decide, we feel that GVC’s share price, with 13% of its revenues coming from German gaming, may not fully reflect the rising risk in this area.