Sportech Gains on Tax Jackpot Worth More Than Debt: London MoverColm Heatley
Sportech Plc, a U.K. gaming operator that has half its business in the U.S., rose by the most in eight years after saying it won a tax claim worth more than 80 million pounds ($120 million).
“For a company with a market cap of about 180 million pounds and net debt of 57 million pounds this is a life-changing event,” Simon French, an analyst at Panmure Gordon, wrote in a note today. “It gives Sportech the funds to fully capitalize on its market-leading position in the U.S., just as certain states within that country are taking a more permissive approach to online gaming.”
The shares advanced as much as 29 percent to 117 pence, the biggest intraday gain since February 2005 and the highest price since 2007. The stock was up 22 percent at 9:44 a.m. as about 1.6 million shares had traded, triple the daily average over the past three months.
A U.K. tax tribunal found in favor of the company in regard to rules that affected its “Spot the Ball” game from 1979 to 1996, Sportech said in a statement today. Tax authorities have until the end of April to appeal the decision and haven’t yet revealed their intentions, Sportech said.
The company anticipates a repayment of 40 million pounds of value-added tax, plus interest that will bring the total to more than 80 million pounds, it said.
Sportech is “very pleased” with the outcome and isn’t ready to discuss any plans for the cash, Chief Executive Officer Ian Penrose said in an interview.
New Jersey approved online betting last month, raising investor expectations that more U.S. states, including Pennsylvania and Florida, will allow the practice. The law has since been barred by a federal judge and the case is expected to be appealed.
Sportech, which traces its history to soccer betting pool tickets first sold outside Manchester United’s grounds in 1923, also offers gambling on horseracing, fantasy sports and casino games.
Panmure’s French, who has recommended buying Sportech shares for more than two years, raised his prediction for the stock price to rise to 145 pence from a previous target of 105 pence.
The legal decision came from the First-Tier Tribunal’s Tax Chamber, Sportech said.