Sydney-based hedge fund Caledonia pitched its wealthy clients on what it considered a compelling trade, seeking $200 million to invest in pokies machine manufacturer Light & Wonder. Caledonia, which manages approximately $US6.5 billion ($10 billion), already holds just under 10 per cent of the dual-listed company. The fund’s thesis centered on investors potentially doubling their money quickly, with capital intended to be returned by September, driven by Light & Wonder’s shift to a primary ASX listing.
Light & Wonder’s decision to move its primary listing from the Nasdaq to the ASX divided advisors, bucking the trend of Australian companies seeking access to US investors. The transition is expected to be turbulent, with index funds selling around 23 million shares as it delists from the Nasdaq and exits the MSCI Index in November, prior to joining the S&P/ASX 100 Index in December. Despite the selling pressure, the move is premised on Light & Wonder becoming a significant player in the Australian index, potentially attracting benchmark-focused investors.
Caledonia believes Light & Wonder’s valuation is compelling, particularly when compared to its rival Aristocrat. Caledonia’s Will Vicars explained that the stock was trading at half the multiple of earnings of its greatest peer and was growing at double the rate. Light & Wonder is a global gaming company delivering games, systems, and services to casino, social and mobile, and lottery sectors. The company hopes to cut net debt from 3.5 times earnings to two times to appeal to ASX investors.
Jarden’s head of equity capital markets origination, Millie Horton, noted that the ASX can offer premium valuations, stronger institutional relevance, and a clear path to index inclusion for high-quality companies. Index inclusion increases institutional relevance, liquidity, and supports a share price uplift, as benchmark aware investors anticipate inclusion.
