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In a shock report, Super Group (NYSE: SGHC) is being accused of overstating financial results from a South African subsidiary, potentially misleading investors in the process.
Spruce Point Capital Management, a money manager focusing on bearish opportunities, made the stunning claims this week.
"Why is it material? We believe the subsidiary’s 2025E EBITDA is approximately $287 million or ~52% of SGHC’s total 2025E earnings before interest, taxes, depreciation, and amortization (EBITDA),” notes Spruce Point. “SGHC’s financials show that Raging River has produced a very attractive 36.5% EBITDA margin. SGHC’s financial reporting, as currently presented, captures 100% of the subsidiary’s extremely strong economics.”
From Casino.org:
Ben Axler’s research firm conducted a forensic review of the internet casino and sportsbook operator’s financials, discovering that the gaming company’s 2025 Form 20-F filed with the Securities and Exchange Commission (SEC) indicates Super Group owns 100% of Raging River Trading (Pty) Ltd when it in fact does not.
The short seller points to a May 2024 notice from South Africa’s Western Cape Gambling and Racing Board indicating 10.71% of Raging River was to be transferred to an entity known as Betway Cares Foundation NPC, meaning Super Group owns 89.29% of that unit, not all of it.
Though its stock price is now down 25% year-to-date, Super Group was once among the best-performing iGaming/sports wagering stocks.
The operator’s Africa strategy and subsequent growth there played in validating its departure from the US. Last year, notes Todo Shriver of Casino.org.
Super Group owns the Betway brand.
Their exit from the US came as little shock to those of us at Gambling911.com.
An internal review led to a determination that Betway did not 'see a long-term path to profitability' in the U.S.
"We have recently concluded an extensive review of our U.S. operations and, at present, we don't see a long-term path to profitability for the sportsbook product," Chief Executive Neal Menashe said back in the summer of 2024.
“As a global business, we constantly evaluate the optimal use of our resources across all markets in which we operate. We have recently concluded an extensive review of our U.S. operations and, at present, we do not see a long-term path to profitability for the sportsbook product.”
The company lost $21.7 million and revenue dropped 13% year-over-year during the month of May.
Neal Menashe, Chief Executive Officer, stated at the time, “This is a difficult decision, particularly because our U.S. team has worked hard and made progress over recent quarters. Nonetheless, recent regulatory developments combined with ongoing assessment of capital allocation requirements have led us to believe that our stringent hurdle for return on capital will likely not be met in this market any time soon. We therefore intend to focus capital and resources on markets where we see the greatest opportunity for scalable, sustainable, profitable super growth, with a disciplined emphasis on operational efficiency.”
Alinda Van Wyk, Chief Financial Officer, commented, “Various strategic exit options are under consideration. We are still early in the process but nonetheless would expect to incur a one-time cash restructuring cost of approximately $30 million - $40 million in connection with such an exit and are actively pursuing multiple efforts to minimize the impact thereof. Further details regarding these potential costs will be shared during our second quarter earnings release.”
Fast forward to now.
“If SGHC is improperly consolidating 100% of Raging River’s financial results rather than 89.29%, we estimate it may be overstating 2025E EBITDA by approximately $30.7 million which represents the 10.71% non-controlling (minority) interest,” observes the research firm. “This would represent a material misstatement that strikes at the heart of SGHC’s reported profitability and raises fundamental questions why the Company recently changed auditors and whether past material weaknesses of internal controls have been remediated as claimed.”
Last week, Betway announced a renewal of their sponsorship deal with esports tournament organiser, BLAST.
The agreement between Betway and BLAST started in March 2019 and has been hugely successful, as we have utilised BLAST’s exclusive access to players at events to generate unique and innovative activations and campaigns that bring the Betway brand to life.
- Gilbert Horowitz, Gambling911.com
