Ainsworth Game Tech accused of intentionally devaluing own stocks

Ainsworth Game Technology, an Australian producer of slot machines, has come under fire from an American investor who claims the firm intentionally undervalued its own shares in order to facilitate a full sale to Novomatic, the massive Austrian company.

Ainsworth CEO Harald Neumann had said that a secondary listing in the US was not a possibility. David Kanen, representing Kanen Wealth Management, which owns around 8 million Ainsworth shares, told the Australian Financial Review that the firm was “severely undervalued” in response to this news.

According to Kanen, the CEO “talked the stock down” by pushing the company into the Australian market’s shadows, which had the effect of lowering volume, decreasing value, and preventing price discovery. Neumann estimated that a secondary listing would cost AU$10 million, whereas Kanen predicted that it would only cost AU$2 million or less.

The problem stems from Ainsworth’s announcement in November of last year that it had appointed Macquarie Capital as its financial advisor to look into “potential opportunities” to boost shareholder value. There have been rumors of an imminent sale, with some stating Novomatic—which now owns a 52% stake in Ainsworth—is well-positioned for a full takeover. Neumann had a top management role at Novomatic before to joining Ainsworth in 2021, which has been brought up by skeptics.

In order to keep the stock price low, Kanen accused Ainsworth of using Macquarie to sell the company before recognizing its full market value. He recommended against agreeing to a Novomatic deal that does not result in an up-listing in the US and undervalues the company.

Not all investors, however, hold this opinion. Allan Gray’s Simon Mawhinney expressed caution, pointing out that companies that list on international stock markets often fall short of expectations.

The AFR lists Oaktree, American Gaming Systems, Zitro Games, and Merkur Group as possible bids for Ainsworth.

On Monday, Ainsworth shares closed at $1.25, up 10% from the previous week but down from their peak of $1.40 in 2024.

Original story by: IAG