Playtech Is Now A High-Risk Stagging Opportunity

• Playtech has a bid offer at less than the current market price
• There are also a number of investors in Playtech with a potentially blocking stake
• Playtech also has had other potential, not confirmed, offers. 

Playtech PLC (LON: PTEC) shares are, as they say, in play. Playtech is also in a difficult technical situation and the end result offers an interesting stagging opportunity. Perhaps not the classical definition of stagging – which is about new issues – but still there’s a possibly sharp share price movement to come. The difficulty is in knowing in which direction that share price move is going to be.

Currently, Playtech shares are at 728 pence (at pixel time) which is slightly odd for a company that has received a takeover bid at 680 pence. This is from Aristocrat but it’s not locked, sealed and delivered as yet. That the share price at Playtech is near 50 pence above the cash offer shows that at least some parts of the market think that another bid can be shaken down from the trees.

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There has been interest too. JKO is sniffing around and as the gossip goes looking to finance an alternative – and higher – bid. At which point it would be up to Aristocrat to also up its bid if it were to still win Playtech.

Matters get more complicated as there are a number of new and large investors on the register. They’ve been ruled to not be acting in concert but even so, they might decide that they don’t like the Aristocrat bid. Given that this is structured to require a 75% approval they’ve enough stock to block that. Aristocrat could come back with a revised bid requiring only a 50% shareholder approval but most would expect a sweetener to the price if it did.

At which point Playtech has just announced that it is extending, to Jan 26, the deadline for JKO to make that formal offer that is being mooted. The details of the Aristocrat bid for Playtech can be found here.   

There are several different possible endgames here, each of which has substantial implications for the share price at Playtech. 

One is that JKO doesn’t come through with a bid, the Aristocrat bid stands, the new large shareholders don’t vote it down and the share price declines, naturally, to the cash offer price of 680 pence. Another is that JKO does come through, or Aristocrat gets worried that it will, and so we’re in a bidding war and one or other of the offers is raised. The share price will therefore jump to whatever is offered. A second offer is unlikely, after all, to be below Playtech’s current market share price. 

A third possibility is that it all goes to pot. JKO doesn’t come through, Aristocrat doesn’t raise its offer, no other bidder flies in but still the blocking minority votes down the Aristocrat bid. At which point we’d rather expect the Playtech share price to sink considerably below the current level until someone else decides to have a go. 

Any trading position has to be finely judged on the probabilities of these varied outcomes. One useful assumption though is that the Playtech share price isn’t going to remain long-term stable from here.