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By Cynical Bear | Tuesday 15 May 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Just over a year ago I thought it might be worth taking a punt on Webis Holdings (WEB) as a special situation play. Well, sometimes, it is better to be lucky to be right as although my reasoning wasn’t exactly spot on, one could have cashed in this morning for about a 200% gain.
My original piece from March last year is HERE. Although I agreed that Webis was a subscale gambling business with cash generating challenges, I thought there could be a low-risk opportunity for a couple of reasons.
First, there was, and continues to be, significant consolidation globally in the gambling sector. This has continued since my piece with GVC’s acquisition of LadbrokesCoral and, more recently, PokerStars acquisition of SkyBet. Secondly, although small, Webis does have a decent position in the US and I thought that could be attractive to someone and I identified Sportech (SPO) at the time as someone who might be interested.
I will put my hands up though and admit that I didn’t anticipate the repeal of PASPA which is the act that, in essence, had made sports betting illegal in the US other than in Nevada and three other states. This is massive news and, quite understandably, any gambling business with potential exposure to the US has benefitted. It’s a bit of light relief for the UK high street bookies who have been battling various regulatory headwinds on home soil.
Webis jumped last night on the announcement that came out mid-afternoon closing at around 2.6p and that has continued this morning with it hitting a peak above 5.5p and is currently trading at around 4.25p as I write.
My tip last year was when the share was around 1.65p and I suggested that there could be a takeover within a year to get a 50% gain. Well I was wrong on both counts as it has been almost 15 months but the possible gain is much greater.
It is always difficult to know exactly how things will play out from here as betting will be regulated on a state-by-state basis and one imagines that the casinos and racetracks might get preferential treatment, and it will take time. Nevertheless, Webis is reasonably well-placed and remains small in market cap terms so could still be a takeover target.
Each to their own from here as it could continue to rise; however, personally, I would have tried to cash in this morning during the excitement. Anything above 4p seems like an excellent 150% -ish return on a punt like this.
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