Less than a week before its scheduled public offering, British bookmaking giant William Hill has been forced to deal with a claim that it failed to disclose in its prospectus details about a pending lawsuit against CryptoLogic, the group's casino software supplier.
Menashe Business Mercantile of Great Britain is in a legal dispute with CryptoLogic over whether William Hill's online casino operation infringes a patent secured by Menashe's owner, Julian Menashe. On Tuesday, Menashe went to the press, attacking William Hill for misleading investors by leaving out information about the pending lawsuit in the company's prospectus.
But this is no ordinary weekend.
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"We stand by what was in the prospectus."
-Alexander Ranson
William Hill
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The prospectus says Menashe's "claim relates to the supply of software by William Hill to users, enabling them to set up a connection with a host computer and to carry out online gambling."
Menashe, who has won one court battle on a preliminary matter against William Hill (which William Hill is appealing) said the prospectus failed to tell investors that if the bookmaker lost the case it "may be forced to cease its online casino business."
Alexander Ranson, a spokesperson for William Hill, told IGN that any claims Menashe has are with Cryptologic and not William Hill because the software that powers the online casino is CrytoLogic's. She said in a worse case scenario, where the courts would rule in his favor, William Hill could easily secure other casino software to run its site.
"This is an issue between him and Crytpologic," she said. "He is going after them through us, but that is our only involvement with it."
But Menashe went to several British media outlets with claims that if William Hill was forced to shut down its online casino operations, it could lead to losses amounting to more than £100 million.
The prospectus says William Hill is "indemnified" against any damages resulting from losing the case by Cryptologic. Menashe, however, said the prospectus was unclear about the extent of that indemnity.
"This is a guy who is basically trying to cause trouble while we get close to our IPO," Ranson said. "This is one guy that is pursuing a case against one of our suppliers. It is a non-issue with us."
Officials with William Hill warned Menashe earlier this month, after he made the company aware that he would go to the press with his complaint, that any attempts to mislead investors could result in charges being brought before him with the Financial Services Authority.
Menashe responded to those threats by arguing that investors have "the right to know" about potential revenue detractors of companies.
Ranson said the controversy really is a classic case of much ado about nothing.
"This is a non-story," she said. "We stand by what was in the prospectus. We had a lot of legal advice in the preparation of that and we are certain that everything that needs to be in there is in there."
Ranson said the news shouldn't effect the float and that company officials have continued on with their road shows for investors. The investors, she said, understand the real issue.
"He is trying to get publicity for himself, and I think investors recognize what this guy is all about," she said. "They aren't worried at all because it is pretty clear in the prospectus what our position is."
Officials with William Hill added that the group's entire online business, including the casino, made £9.16 million in profits last year. So the more than £100 million losses that Menashe referred to were a mystery to them, the group said.
The bookmaker's online division, which includes its sports betting Web site, is the fastest-growing betting channel within the group. It's gross win for last year was £35.4 million, more than double the sum recorded in the previous year.
Menashe offered to settle his dispute with William Hill for a £200,000 licensing fee and 1.5 percent of the annual gross win from the online casino, which the company called "unrealistically high."
Ranson said that despite being temporarily sidetracked by the Menashe situation, the pre-float road shows are going we. She also said officials with William Hill are more than pleased as the days dwindle down prior to the IPO.
She said conditional dealings of the William Hill stock will begin Monday, with unconditional dealings and admission to the London Stock Exchange occurring on Thursday.