A collective of investors in the UK-based online gaming leader Entain (OTC: GMVHF) has initiated a class-action lawsuit aiming for restitution for the harm inflicted on the company's stock value due to a bribery investigation involving its former operations in Turkey. 

The lawsuit, submitted on Wednesday in London’s High Court by 20 institutional investors, seeks $150 million in compensation. It asserts that Entain did not adequately notify investors about an inquiry by the UK tax authority, HMRC, regarding bribery and corruption at its Turkish subsidiary, Headlong. 

In the end, Entain would incur one of the largest fines in UK corporate history, amounting to £600 million (US$760 million) to settle the matter. Company shares have nearly decreased by 50% since May 2023, when it alerted shareholders about the upcoming penalty. 

Suspicious Networks 

In December 2017, Entain, formerly GVC Holdings, divested Headlong at no cost before its intended acquisition of the British traditional betting company Ladbrokes-Coral. 

Online gambling is prohibited in Turkey, and the firm aimed to eliminate black-market activities that could prompt regulators to cancel the Ladbrokes agreement. 

However, there was a time when Headlong represented a third of Entain's income, and the firm utilized dubious cash-collection systems and payment processors to conceal dealings from Turkish financial authorities. It reportedly bribed Turkish officials to overlook the situation. 

HMRC charged Entain with not preventing Headlong employees from participating in bribery. The unit was managed so inadequately that several of its workers were cheating the parent company by stealing funds. 

Entain, currently owning 50% of BetMGM, faced potential prosecution under the UK Bribery Act; however, prosecutors ultimately opted not to proceed, as this could have led to the company losing global licenses and jeopardizing thousands of jobs. 

Internal Turmoil 

If the case goes to trial, a judge must assess how much the Turkish investigation contributed to Entain’s decline in the stock market. Several additional elements have hurt its stock price over recent years, including a string of unsuccessful acquisitions. 

Activist investors have recently assumed a more significant role within the group and have expressed worries regarding its strategic direction. This could have resulted in the departure of former CEO Jeannette Nygaard-Anderson in December 2023, following speculation about internal discord. 

Andrew Williams, a partner at Fox Williams, the law firm that lodged the complaint, expressed his hope that the lawsuit would “provide institutional investors with the chance to recover significant losses, but above all, enhance transparency and governance in the UK’s gambling industry, reminding public companies of the importance of adhering to their disclosure responsibilities.”