THE only way to win money out of a casino is to own one (unless you’re Donald Trump). Thomas Jefferson is supposed to have said the first part.

       If you own the casino and you’re still not winning, maybe it’s time to consider whether you’re using the right strategy.

       Entain Plc’s reluctance to cash in its chips when the going was good looks less like the cool-headed calculation of a corporate profit-maximiser than the stubbornness of a gambler who’s too hooked to walk away.

       The London-based betting company, which owns Ladbrokes and has a half share in the BetMGM joint venture in the United States, said last week that its chief executive officer, Jette Nygaard-Andersen, was stepping down with immediate effect after three years.

       Entain shares had lost two-thirds of their value since a 2021 high, reducing the company’s market value to ￡5.1bil (US$6.5bil) from a peak of ￡13.9bil and stirring disgruntlement among activist investors.

       For shareholders, what has aggravated the pain of the stock’s decline was the company’s rejection of multiple takeover approaches at much higher prices.

       In January 2021, just before Nygaard-Andersen was appointed, Entain’s board turned down an ￡8.1bil offer at a 22% premium from its US venture partner MGM Resorts International, saying it “significantly” undervalued the company.

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       Eight months later, it rebuffed a proposal from DraftKings Inc, which the Boston-based sports betting company then raised to ￡16.4bil, a 46% premium.

       After discussions with Entain, DraftKings eventually walked away without making a formal offer.

       Entain preferred to be the one making, rather than taking the bets.

       The company backed itself to continue riding a global surge in online gambling, spending more than ￡2bil on acquisitions from Canada to Croatia to the Netherlands in the three years that Nygaard-Andersen was CEO.

       This buying spree (totalling a dozen announced transactions, including a couple that were withdrawn, according to data compiled by Bloomberg) has so far failed to propel Entain’s market value to anywhere near even the initial offer from DraftKings in 2021.

       The most questionable move appears to be the ￡750mil purchase in June this year of Poland’s STS Holding SA. To help fund the acquisition, Entain sold stock at a discounted price of 1,230 pence, raising ￡600mil.

       That approach was “illogical” and “perplexing on many levels,” Ricky Sandler, founder of Eminence Capital LP, said in an open letter several days later.

       It’s hard to disagree. Having rejected takeover offers at 1,383 pence and at least 2,500 pence as unattractive, how did it make sense to sell equity at an even lower price two years later? It’s not as if STS, Poland’s leading sports-betting operator, presented an unmissable opportunity.

       Poland doesn’t feature among the 11 biggest online betting markets in Europe, according to Entain’s 2022 annual report. While growing fast, STS’s net gaming revenue represented less than 3% of Entain’s ￡4.3bil total last year.

       For that, the company paid a price equal to about 10% of its then-market value. Granted, there’s a lot more to Entain’s stock slide than a scattershot merger and acquisition strategy.

       Earlier this month, the company agreed to pay ￡615mil to resolve a probe with UK prosecutors following an investigation into potential bribery at its former Turkish business – a legacy issue that predates current management.

       (In last week’s announcement, Nygaard-Andersen said the settlement offered a clean inflection point for her to move on and the group was now “safe, stable and sustainable.”)

       Meanwhile, the outlook for online gambling growth has dimmed.

       Tightening regulation and a voluntary exit from unregulated markets have weighed on Entain’s profitability, paring ￡485mil from earnings before interest, tax, depreciation and amortisation to leave this year’s estimate at about ￡1bil, according to a Nov 2 company presentation.

       The question is whether Entain’s leadership should have seen this coming. All gamblers know that hot streaks end. The global explosion in online betting was at least partly a function of technology running ahead of legal and regulatory systems.

       Smartphones put a casino in everyone’s pocket, and the industry was quick to capitalise, developing products designed to prey on the addictive tendencies of its most profitable customers.

       A backlash was inevitable as the social consequences of this growth, which was turbocharged by the pandemic, became more apparent.

       Entain says it’s a company transformed and aspires to be the most responsible operator in the industry.

       It has pivoted back to focus on organic, rather than acquisition-driven, expansion.

       “We remain confident in our ability to deliver on the significant growth opportunities that are ahead of us,” the company said in an emailed statement.

       Investors seem to agree. Entain shares have rebounded by 22% since the CEO’s exit, and speculation that the company could again be a takeover target has resurfaced.

       Its go-go acquisition days may be over, but the company still has some chips to play. — Bloomberg

       Matthew Brooker writes for Bloomberg. The views expressed here are the writer’s own.