Marc Cohodes – Intertain Group Ltd: A House Of Cards

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Slides from the Grant’s Conference – Intertain Group Ltd: A House Of Cards by Marc Cohodes

Intertain Group Ltd: IT Unmasked – Another Cdn. Pipe Dream

Intertain was made to line the pockets of managements, bankers & related parties

  • In early 2014, Intertain was created with assets from Amaya Inc., with Amaya becoming Intertain’s largest shareholder
    • David Baazov – Amaya’s CEO – has been charged with insider trading by the Quebec AMF
    • AMP claims that Baazov was part of a network of insiders who used secret codes to conceal trades about companies planning to merge or acquire other companies.
  • John Fitzgerald (also known as “Fitzy”) was named CEO of Intertain
    • Fitzy has allegedly been involved with penny stock promoters and has previously been named as a defendant in shareholder lawsuits
  • Keith Laslop was named CFO of Intertain
    • Laslop has links to Gerova Financial Group, whose top officers (John Galanis et al) were by the SEC for fraud
    • Laslop himself was named in multiple lawsuit arising out of the Gerova fraud allegations
  • Intertain’s roll up strategy
    • In early 2015, Intertain acquired Jackpotjoy and other companies for £4258 million plus earn-outs if and when Jackpotjoy meets earnings benchmarks
    • We believe the CEO and CFO also got 2% of the transaction value – as an incentive to make the sale
    • Intertain has spent $1.1 billion in acquisitions and costs, and has paid over 10% of that amount to advisors
  • Spruce Point accuses Intertain of questionable margins, improbable results, bad management, account irregularities and more (
    • After Spruce Point’s publication, Intertain moved to restore shareholder value by conducting a strategic review
    • February 2016: Fitzy, Gamsys founder NAME, and several Intertain directors resign from Intertain
      • This has been a popular strategy among companies growing through acquisition and carrying heavy debt
    • The “strategic review” resulted in no transaction but Intertain paid over $10 million in fees for the review
    • Intertain decided to relist its shares on the London Stock Exchange and returned to the debt markets for cash to pay earnouts.
    • Cryptologic assets (from Amaya) – once Intertain’s crown jewel – were written off in early 2016
  • Intertain now has until February 2017 to raise £150 million
    • The Gamesys deal keeps getting worse
    • Intertain Group recently paid £25 million to extend its non-compete and capped the earn-out at almost 90% of the upfront payment

Things that make you go hmm…

Short Thesis: Margins appear near impossible

  • Growth in margins appears to be impossible; management controls the mechanism that drives margins; and both management and Gamesys are incentivized to grow margins
  • Gamesys margins are 20% greater than closest public comp; 25%+ greater than private bingo players in the UK; 25%+ greater than Gamesys’ own private company filings
  • All parties are incentivized by higher short-term results
    • Intertain Group management gets better results for near-term quarters which helps their stock price (note: they appear to be obsessed with it)
    • Gamesys receives additional consideration as their earn-out is based on these margins
  • A rudimentary review of Gamesys subsidiary financial statements suggests that this margin increase isnear impossible
  • Note that the acquired Gamesys assets were subject to a new and incremental 15% Point-of-Consumption tax; thus making it that much more unlikely that these margins are possible

Intertain Group Ltd


See the full slides below.


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