Dodge & Cox emerges as Entain's second largest shareholder
Investment firm Dodge and Cox, has significantly increased its stake in Entain, positioning itself as the company’s second-largest shareholder with a robust 10.3 percent ownership. This move reflects growing market sentiment that Entain may be undervalued, especially after a six-month period marked by a substantial 36.7 percent drop in its stock value. Currently, Dodge and Cox ranks just behind American financial services company, Capital Group, which holds a 14.8 percent share in Entain.
Notable shareholders also include BlackRock, with a 5.5 percent stake and Sands Capital Management, which is listed as owning 5 percentof the company.
Entain’s capital allocation strategy
In its recent quarterly financial report, Entain unveiled a comprehensive overhaul of its capital allocation strategy. This transformative step involved the establishment of a dedicated capital allocation committee on the board, tasked with scrutinizing decisions related to capital deployment. The company’s objective is to focus more intensively on investments that promise higher returns.
Chief Executive, Jette Nygaard-Andersen, emphasized the company’s commitment to reducing the pace of mergers and acquisitions (M&A) activities in the future. This strategic shift came after facing criticism from investors who believed that Entain was undermining shareholder value by funding bolt-on acquisitions with undervalued shareholder capital.
Year of ups and downs
The news of Dodge and Cox’s increased stake in Entain is the latest development in a turbulent year for the company’s share price. Entain’s stock has been on a rollercoaster ride:
- In February, the company witnessed a 13 percent stock price plunge when its joint venture partner, MGM Resorts, ruled out a second takeover bid, causing uncertainty in the market.
- In a previous episode, Entain had rejected a takeover bid from the US gaming giant in January 2021, asserting that the offer significantly undervalued the company.
- The stock faced another downturn in March when the company forecasted lower margins for 2023 compared to the previous year, leading to investor concerns.
- While the stock did recover most of its value by May, news of a significant HRMC penalty for historic misconduct triggered another decline.
- This downward trend was exacerbated when shareholder Eminence Capital criticized Entain’s acquisition of STS Holdings as an “empire-building, shareholder value-destroying strategy.”
- In August, Entain allocated £585 million for an HMRC probe, a figure higher than expected, causing the stock to slump further.
- Finally, in late September, Entain stock hit a three-year low at £9.18 per share after warning of “softer than expected” online revenue.
Independent investment firm
Background; Van Duyn Dodge and Morrie Cox, disillusioned by the conflicts of interest in the 1930s investment world, envisioned a distinct asset management firm. Their vision prioritized clients and community over profits, built on a straightforward model committed to investment excellence, independent ownership, and integrity. This foundation allows them to serve generations, not just decades.
Today, Dodge & Cox, originating in San Francisco, is one of the world’s largest independently owned investment firms. They manage funds globally for individuals and institutions, focusing on core investment principles rather than short-term trends or sales targets. By concentrating on fewer strategies, they deliver with passion and confidence. They believe in their mission and invest their own savings alongside their clients’.
Entain Plc’s current trading stands at GBp956.00, marking a 1.59 percent increase. The company continues to encounter a challenging and fluctuating market scenario.
(In photo above, Roger Kuo, President and Dana Emery, Chair and Chief Executive of Dodge and Cox.)
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