NeoGames Stock Stumbles as Caesars Planning to Trim Stake

Posted on: September 8, 2021, 10:40h. 

Last updated on: September 8, 2021, 06:24h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

NeoGames (NASDAQ:NGMS) stock is one of today’s worst-performing consumer discretionary names, as investors depart on news insiders, including Caesars Entertainment (NASDAQ:CZR), could sell up to four million shares.

NeoGames stock
NeoGames stock highlighted on the Nasdaq following its IPO last year, above. The shares are slumping today as insiders, including Caesars, sell. (Image: Twitter)

In midday trading, shares of the Israeli company are off nearly 10 percent, extending a roughly 17 percent slide over the past month.

A Form F-1 filing with the Securities and Exchange Commission (SEC) released Tuesday indicates inside investors are selling 3.45 million shares of NeoGames — transactions that will not result in any proceeds accruing to the gaming company.

The underwriters may also exercise their option to purchase up to an aggregate 518,601 additional ordinary shares from Caesars Entertainment, one of the selling shareholders,” according to the regulatory document.

Should that option be exercised, 3.97 million NeoGames shares will be sold. The company’s F-1 filing indicates the proposed maximum offering price of the sale is $40.41. That’s a steep discount to where NeoGames stock closed Tuesday and explains why the name is slumping today.

Caesars Cashing in on NeoGames Stock

Caesars inherited a 24.5 percent stake in the iLottery company through its recently completed $3.69 billion takeover of William Hill.

That’s equivalent to 6.12 million NeoGames shares, and enough to make the casino operator the largest shareholder in the online lottery firm. However, Caesars is dramatically paring that stake. If underwriters do not exercise their option to buy another 518,601 NeoGames shares from Caesars, the casino company will have 3.06 million shares in an Israeli firm, or a 12 percent interest.

Should that option be exercised, Caesars’ NeoGames position would be trimmed to 2.54 million shares, or 10 percent of the shares outstanding, according to the regulatory document.

Two other NeoGames insiders are combining to sell approximately 294,000 shares. The company went public last November, and the stock is up 16.53 percent year-to-date.

Sensible Move by Caesars

Caesars reducing its NeoGames position isn’t necessarily an indictment. Rather, it’s more likely a reflection of divergent businesses and the desire to bring in added capital. Assuming the full allotment of Caesars’ NeoGames shares is liquidated, Harrah’s operator will gross proceeds of $123.8 million.

That cash defrays part of the $3.69 billion the buyer paid for William Hill and could be directed toward bolstering the operator’s iGaming and sports wagering footprints. Plus, Caesars still retains some NeoGames stock, meaning it can simply sit on that investment, wait for it to appreciate, and sell it at a later date for better pricing.

In the US, NeoGames is also operational in New Hampshire, North Carolina, and Virginia, and is pursuing iLottery contracts in Alaska, Connecticut, Maryland, Massachusetts, Missouri, Ohio, and Oregon. It also provides iLottery services in Alberta, Canada and some countries in Europe.

Caesars isn’t directly involved in the internet lottery space.