Today, the Swedish Gambling Authority (Spelinspektionen) announced that it revokes the license, to operate online gambling, for SafeEnt (NinjaCasino). SafeEnt is the Estonian subsidiary to Global Gaming that was holding the license to operate online gambling on the Swedish market. This means that the flagship brand, Ninja Casino, is closed until further notice.
According to the Swedish Gambling Authority, the reason for revoking the license are several operational shortcomings regarding player-responsibility and money laundering. The authority states that players have been able to lose large amounts without a reaction from the company and the players have been able to make deposits above deposit limits. The authority also states that there are infringements regarding the company’s risk assessment and actions regarding “knowing your customer”. Moreover, the authority assesses that SafeEnt has offered multiple bonuses and conducted lotteries that were not included in the company´s license.
SafeEnt will appeal against the gambling authority´s decision to the Administrative Court (Förvaltningsrätten). SafeEnt can request inhibition during the time Administrative Court processes the matter. The means that if the Administration Court assesses that it is not very likely that the gambling authority’s decision is correct; the gambling authority´s decision will be halted until the final verdict from the Administration Court. We believe it is likely that SafeEnt will be granted inhibition given the large uncertainties regarding the matter. Furthermore, based on previous cases, we believe it can take more than 12 months for the Administrative Court to process the matter.
Moreover, if SafeEnt is dissatisfied with the outcome in the Administration Court, the company can appeal to both the Administrative Courts of appeal and then to the Supreme Administrative Court. If this matter goes all the way to the Supreme Administrative Court, this process can take several years, during which time SafeEnt might or might not continue to conduct gambling with its Swedish license.
All in all, there are many uncertainties, especially as this is the first revoked license with the new regulation in place. As a result, we focus on what will be left if SafeEnt will lose the Swedish license. Based on tax data we estimate that SEK 112m in sales was generated from SafeEnt´s Swedish license in Q1, of SEK 162m in total. Leaving SEK 50m in sales from other markets (Finland and Estonian) and other licenses (External platforms), implying SEK 200m in annual sales. In addition, the cash position at the end of Q1 was SEK 215m.
Closing the Swedish market would require some major cost savings and one-time expenses to reach profitability on the remaining markets. However, the majority of the cash position should still be left, and the value of the operations would be fair around an EV/sales multiple of 0.5x. This would indicate a value of around SEK 5 per share.
We will most likely receive additional information in the coming days, regarding the appeal and a potential inhibition, that will shed some further light on the matter.
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