Playtech is Facing Shareholder Backlash of Bonus Plan for Executives

Details: Category: Gambling Industry; Created: Monday, 07 October 2024 08:05

Once again, sports betting development company Playtech is in the news. However, this time around it is not good news for them. This is because Playtech is Facing Shareholder Backlash after a proposal to give its executives a $110 million bonus. Therefore, some Playtech Shareholders are not happy with the decision due to the lack of performance by the company.

The bonuses are a result of the company's recent €2.3 billion divestiture of its Italian sports betting and gaming division, Snaitech, to Flutter Entertainment. Last month, Playtech made an announcement regarding plans to distribute bonuses amounting to €100 million and €34 million for the management teams of Playtech and Snaitech.

This bonus program, revealed concurrently with the sale, positions Weizer as the primary recipient, although Playtech has not specified the precise sum he may obtain.

Additionally, executives will be eligible for 10% of the profits from any future sales, a provision that has raised apprehensions among investors.

Playtech is Facing Shareholder Backlash for the Bonus due to Lack of Performance

Playtech is Facing Shareholder Backlash for the Bonus due to Lack of Performance Some shareholders have expressed their concerns regarding the bonus plan, highlighting the absence of performance targets as a major drawback.

Jeremy Raper, an investor in Playtech, criticized the proposal as "the most egregious case of shareholder value expropriation in the history of UK public markets.”

Raper stated that the proposed plans, in their current form, would represent the most severe instance of shareholder value expropriation ever witnessed in the history of public markets in the United Kingdom. He further emphasized that these plans are a prime example of crony capitalism at its most detrimental, embodying precisely the kind of result that the Governance Code was designed to avert.

Notwithstanding these criticisms, Playtech has garnered backing from shareholders. At the moment, they have 34.4% of the company's shares, who have pledged to support the bonus plan. The company intends to conduct a shareholder vote by the end of November.

The investor contended that the transaction would signify a significant setback for shareholders. This is because it gives 10-15% of the company's total value being relinquished to management as a bonus.

The FTSE 250 company indicated that Weizer will be “the largest participant” in the €100 million package, although it did not explicitly specify the extent of this participation.

For the bonus, along with the regular management remuneration, to be implemented, it must obtain shareholder approval during a vote scheduled for November.

Palm Harbour Criticizes 'Excessive' Bonus Structure

An additional investor has issued an open letter that strongly condemned the compensation package. Peter Smith, managing partner at Palm Harbour Capital LLP, expressed strong disapproval of the "excessive" bonus structure, citing a lack of transparency and its disconnection from both the deal itself and Playtech's financial performance.

While Smith acknowledged a significant rise in Playtech's share price, noting an increase of over 90% in the past year, he contended that the stock had been previously undervalued. He pointed to uncertainties surrounding the Caliplay B2B relationship, exposure to unregulated markets, and concerns regarding governance practices.

He stated, "We do not believe that management warrants life-altering wealth for selling a profitable business at a reasonable price, despite their generally commendable performance.

"They should receive appropriate compensation, but it is illogical to award them an excessive payout for actions that any competent manager could have undertaken.

"We observe that the shares have declined following this announcement, when they should have experienced a strong rally due to the news of the deal's completion.

"This suggests that the market aligns with our perspective. Investors are reluctant to include 'management over-compensation / poor governance' as a factor in their overall valuation."

About Playtech

Playtech plc, established in 1999, is a prominent developer of gambling software. The company specializes in helping bookies open a sportsbook by providing software solutions for various online gaming platforms. These include online casinos, poker rooms, bingo games, sports betting, scratch cards, mobile gaming, live dealer, and fixed-odds arcade games.

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