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888 has been removed from the mid-cap 250 and 350 index as part of the London Stock Exchange’s latest index rebalancing.

FTSE constituents are reviewed every quarter, and at each review, some companies exit while others will enter.

The operator, which owns William Hill, joined the FTSE 250 index in June 2020.

The FTSE 250 is a stock market index comprised of 250 UK-based mid-market cap companies listed on the LSE.

The relegation did not come as a surprise after shares in the Gibraltar-based operator fell nearly 70% over the past 12 months.

At the time of writing, 888 has a market cap of £270.6m.

Compliance investigation

On 30 January, 888’s share price crashed 27% when the company announced the immediate departure of CEO Itai Pazner in the midst of an internal compliance probe.

888 suspended VIP activities in some dot com markets after best practices regarding Know Your Client (KYC) and Anti-Money Laundering (AML) processes were not followed for VIP customers in the Middle East region.

Prior to this announcement, 888 had already stated that CFO Yariv Dafna would leave the company following the publication of its full-year 2022 financial results in March.

However, in light of Pazner’s departure, Dafna agreed to stay on until the end of 2023.

William Hill heritage

According to a trading update, overall revenue for Q4 2022 slipped by 2.6% year-on-year to £458m.

However, the company ended the year with £1.8bn in equivalent debt as a result of the William Hill acquisition.

Meanwhile, 888 is also preparing for what could be the largest fine ever levied by the UK Gambling Commission (UKGC).

The UK gambling regulator could impose a fine of between £15m and £20m for compliance failures with social responsibility and anti-money laundering requirements at William Hill.

888 set aside cash to cover the penalty when it first acquired William Hill from Caesars.

According to reports, the anticipated fine could surpass the previous record set by Entain of £17m.

In September 2022, Peel Hunt analyst Ivor Jones said that 888, along with Entain and Flutter Entertainment, was undervalued.

“888, Entain and Flutter are all cash-generative businesses, but near-term cash flow is being held back by investment,” Jones said.

Despite the challenges, Jones said the companies were undergoing transformation.

In the case of 888, he predicted that 888 would not meet its target net debt/EBITDA range of 2-3x until 2026E due to its debt position which resulted from the acquisition of William Hill.

At that point, 888 has the potential to pay a yield of 38.1%, although Jones acknowledged this would be a long wait for investors, especially in uncertain market conditions.

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