What next for Global Gaming?

 Shares in Global Gaming lost almost half their value this week after the Swedish Gambling Authority announced it had revoked its licence with immediate effect, with the value of the company now at around 12% of its peak in November last year.

Global Gaming has announced it will appeal the decision to the Swedish Administration Court, with the firm also asking the court to suspend the revocation until the case is fully settled. The court has yet to grant that interim relief, leaving the future somewhat uncertain for Global Gaming.

In the best-case scenario, the courts throw out the licence revocation and the company emerges relatively unscathed form the incident, albeit with additional legal costs and some significant operational distractions in the meantime. This is deemed as 25% likely, or a 3/1 shot, according to Redeye analyst Jonas Amnesten.

Base case

The base case, around a 50% chance according to Amnesten, would be the court granting interim relief, and allowing Global Gaming to continue its Swedish operations as it hears the case.

“Global Gaming should be able to operate an additional nine months before the license is finally revoked and further appeals prove fruitless,” Amnesten wrote in a note to clients. During this time, the company will have time to adapt the business size to the new reality. Potentially the company could find a licence holder that is willing to partner up with a white label deal or buy the Ninja Casino IP.”

“All in all, Global Gaming will have several alternatives and the strong cash position will buy the company time to act. Lowering the marketing expenses at the end of 2019 and additional cost savings will benefit the cash flow.” Amnesten noted there was still “substantial value” in the Ninja Casino IP, should the firm choose to sell it off.

Bear case

In the bear case (25% likely), the Swedish court will not grant any interim relief and the firm could be forced to move quickly to migrate the Ninja Casino brand to an external platform or sell the IP.

One analyst, speaking on the condition of anonymity, said the most obvious strategy for the firm without a Swedish licence would be to take a more aggressive approach to grey markets such as Norway, Finland, Germany and the Netherlands or even Asia. Global Gaming is estimated to get just under a third of its revenues from Finland and Estonia currently. The firm could also delist to purse these grey markets more aggressively.

Down to the courts

This means the key question is whether an appeal will be successful.

The current pricing of the stock suggests the market is more negative on a successful appeal with the price closest to Redeye’ bear case. One Swedish industry exec suggested Global Gaming’s best chance of a successful appeal would be to point out the number of other licensees with similar flaws in their systems.

Another analyst also suggested an appeal had a good chance of success, adding: “If the revocation stands up in court, surely the regulator then has to then take licenses off anyone else found doing similar, which is likely half the market.

“It seems like the courts could be lenient with a company listed in Sweden with Swedish shareholders that shows a willingness to comply.”