888 Gains as Gambling Penalty Better Than Losing LicenseBy
Regulator says online gambling company didn’t protect clients
Technical glitch failed to prevent 7,000 clients from playing
888 Holdings Plc shares rose in London trading as the online betting operator was hit with a 7.8 million-pound ($10 million) penalty for failing to prevent problem gambling, though avoided the worst-case scenario of having its license revoked.
888 had a series of computer glitches and failed to effectively screen for problem gamblers, the U.K. Gambling Commission said Thursday. One customer displayed signs of problem behavior so significant that it resulted in criminal activity, with the gambler stealing 55,000 pounds from his employer to play, the regulator added. The stock rose as much as 5.6 percent.
The shares are still trading about 10 percent lower than the level before the investigation was first announced May 15. The settlement comes as U.K. regulators seek to clamp down on gambling companies in relation to their corporate responsibility. Still, a worst-case scenario would have been 888 losing its gambling license, according to Simon Davies, an analyst at Canaccord Genuity.
“This removes considerable uncertainty,” he wrote in a note, adding that the company’s entry into the FTSE 250 Index, announced Wednesday, will drive demand for the stock.
Though investors were relieved, the settlement was bigger than the range of 1 million pounds to 1.5 million pounds that many people in the business expected, said Warwick Bartlett, CEO of Global Betting & Gaming Consultants.
“They’re sending a message to the industry,” he said. “This is a pretty hefty penalty.”