US activist investor Jason Ader has apparently gone on the warpath again, and is pushing for US fantasy sports company DraftKings to buy Israel based, Isle of Man incorporated online gaming and financial firm Playtech.

Mr. Ader’s SpringOwl Asset Management acquired a roughly 5% stake in Playtech in 2018, and has seen the value of that investment decline by about 50%. Playtech’s current share price in the £3.50 range is down from the £5-6 per share range where SpringOwl bought in, and only about a third of Playtech’s all-time high of about £10 per share set in mid 2017.

SpringOwl bought in to Playtech at about the same time that longtime controlling shareholder Teddy Sagi exited the company, in a series of secondary share sales which (in hindsight) timed the market nearly perfectly, as Playtech’s value rose steadily from 2016 through to mid 2018. Mr. Sagi’s exit from the Playtech stage, and the entry of a number of US and UK institutional investors into the stock such as T. Rowe Price and Odey Asset Management, opened the door for known activists such as Mr. Ader (and Odey) to spin their magic and increase value in their holdings.

But, things haven’t worked out that well so far, as we note above. Playtech’s first half 2020 results saw EBITDA decline by 16% from 2019, with the company’s hide somewhat saved by great performance in the smaller part of its business, its TradeTech financials unit.

TradeTech comprises three businesses acquired over the years by Playtech in an effort to diversify away from pure gaming – two “B2B” businesses, CFH Group and Alpha Capital Markets, which serve as technology, liquidity and market making provider to (mainly) Retail FX and CFD brokers, and one B2C business, the company’s own Retail FX operation Markets.com. Online financial trading activity has skyrocketed in 2020 as markets became extremely volatile, producing great results at TradeTech as well as at other online financial trading companies.

But Playtech, for all its faults and problems recently, is a cash flow positive and reliable business, which has a market cap of £1.06 billion (or USD $1.39 billion). Playtech posted EBITDA of €160 million (USD $189 million) in the first six months of 2020. (Playtech hasn’t yet disclosed Revenue for 1H-2020, but in 2019 did €1.5 billion or USD $1.8 billion in annual Revenue).

DraftKings, which went public earlier this year (NASDAQ:DKNG), sports a hefty market cap of about $12 billion – almost nine times that of Playtech – yet only did $159.5 million in Revenue in 1H-2020, and posted an EBITDA six month loss of $57.5 million.

Enter Jason Ader, who has waited more than two years on his stake in Playtech which cost him about $100 million but is now worth only about $69 million. Soon after DraftKings dropped its (somewhat disappointing) 1H-2020 results on the market last week, Mr. Ader sensed unease among DraftKings investors while sensing an opportunity for his long-held position in Playtech. And so, he gave an interview to Bloomberg in which he stated about DraftKings:

“They should be making a stock-for-stock deal with Playtech… If I were on their board, that’s what I’d be saying.”

This isn’t Mr. Ader’s first rodeo. He was largely behind another gaming company’s takeover of one of his holdings, GWC’s 2016 purchase of Bwin.Party Digital Entertainment (in which SpringOwl held a significant stake) for £1.1 billion. He was a longtime, top-ranked gaming company analyst at investment bank Bear Stearns before getting into money management. Jason Ader also sat on the board of Las Vegas Sands, one of the largest global gaming companies for eight years.

Playtech’s shares in London had already closed on Friday when the Ader comments surfaced in the US. But Playtech ADRs also trade on the US over-the-counter market, and those shares rose by 18% on Friday afternoon. It will be interesting to see how PTEC trades in London when markets open later this morning.

Ader and the other institutional shareholders have already started a revolt of sorts, rejecting Playtech’s proposal on senior management pay at the company’s latest shareholder meeting.

How this all plays out remains to be seen. Mr. Ader holds no real sway or influence over DraftKings, but from the looks of it he, and possibly some of Playetch’s other institutional investors, might start exerting real pressure to engineer some sort of takeover of the company at a premium to where it currently trades. Playtech certainly makes for an attractive takeover target – steady business, good name, well managed, cash flow positive, and trading at a low single digit multiple of EBITDA.