Are sports betting companies a safe investment in 2021?

There is an age-old saying when betting, be it sports or casinos; the house always wins. So you would expect betting companies to be, well, a safe bet when it comes to investing. Although, the market does have a tendency to swing dramatically, as with many industries, for the past few years, the companies have generally been seen as a sound investment. As the online gambling community has grown consistently in popularity alongside traditional betting routes, the market has also increased in value accordingly.

However, 2020 took a toll on the entire stock market, it comes as no surprise that some of the biggest gambling firms were included in this. With Brexit on the horizon and COVID-19 hitting the economy hard, it was no surprise that the stock market value of said firms fell by more than £500m. Those with physical facilities have faced the difficulties not only of their premises being closed for large portions of the year but sporting events themselves being cancelled across the country.

Big players like William Hill saw a drop of 8% whilst others such as Entain plc, owners of Ladbrokes and Coral, fell by 7%. Even smaller companies weren’t safe from this slashing with almost all areas of the stock market seeing a significant downturn at least once during the year.

That is not to say this is all bad news, other companies such as Gamesys Group plc managed to reach a high of 1,322.04 in October 2020. Following Gamesys’ trend, we can see that this swiftly dropped in November 2020 but has continued to rise since then with only the slightest downturn in the past week. A positive growth in the face of economic crisis.

Looking once more at William Hill, we can see that despite the initial swift downward trajectory this has steadied from the latter half of 2020 onwards. Whilst there is still a general downward movement it is nowhere near the lows seen in November 2020. We may, of course, be seeing the annual New Year’s bump, where stocks see a spike around the turn of the year. However, after the year we’ve just had – steady is by no means a bad thing.

Sports Betting Performance

Under COVID restrictions it appears that, despite initial setbacks, the sport betting industries have found solace in their online facilities, enticing customers with new signup offers and other online exclusive means. A fact that has not been ignored by overseas companies, particularly American based firms who are looking to capitalise on the legalisation of sports betting in the US. A recent takeover of William Hill by US firm Caesars Entertainment, owners of the world-renowned Caesar’s Palace, to the tune of £2.9billion gives some indication of the worth of the UK companies.

An interesting one to watch is Entain plc as they have just refused a takeover attempt from US-based MGM Resorts International that offered a bid of £8.1billion for the company. In a statement addressing this, Entain said that the price “significantly undervalues the Company and its prospects” and urged shareholders to “take no action”. This caused a surge in the price of Entain’s shares pushing it to higher than that of MGM itself, suggesting people may be watching and waiting for another, more agreeable, bid from the Americans.

It would be a fool’s statement to say categorically any share is a safe bet as the market right now is still struggling to find its feet. Plus with the suggestion that further lockdown restrictions will soon hit the UK, it is unlikely companies that work primarily in the high street and other offline capacities will find a speedy recovery. However, those who have online facilities may find, particularly with everyone stuck at home that foreign bodies are lying in wait to give the market a much-needed boost, as evidenced by the MGM/ Entain offer.

It is, unfortunately, a waiting game to see what 2021 brings as until the uncertainty of the UK lockdown is lifted and the true impact of Brexit is felt, we can do little but watch closely. If the American interest is anything to go by, however, do not underestimate the value of the UK betting market.