American Funds Ratchets Up Kindred Group Exposure

Posted on: September 29, 2021, 10:22h. 

Last updated on: September 29, 2021, 10:46h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Kindred Group, the Swedish online gaming operator, said Capital Group owns 10.53 percent of its shares and voting rights as of Sept. 24.

Kindred stock
Unibet parent Kindred is a favorite of some fund issuers. Capital Group continues buying shares of Kindred stock. (Image: Stewart-Haas Racing)

The owner of the 32Red, Bingo.com, Otto Casino, and Unibet brands, among others, made the announcement regarding Capital Group’s stake on Tuesday. That’s after receiving a notification of “major holdings” from the mutual giant the prior day. Capital Group mutual funds are issued under the American Funds label.

News of Capital Group’s increased stake in Kindred comes after the Swedish gaming company was loosely mentioned as a potential takeover target. Mutual fund issuers typically take passive stakes in companies and usually don’t get involved with pushing for acquisitions.

Kindred trades in Stockholm under the ticker “KIND.”

Capital Group Likes Kindred Stock

The most recent notification from the gaming company regarding Capital Group’s investment in the firm isn’t the first. In fact, the fund issuer appears to be rather bullish on the stock.

In January, Kindred notified investors that Capital Group’s position in the company increased to 5.03 percent from 4.58 percent. That was followed by a July announcement that the fund giant’s stake in the gaming operator jumped to 5.15 percent, meaning that over the course of 2021, Capital Group more than doubled the amount of Kindred shares it holds. The Kindred filings indicate it’s American Funds SmallCap World Fund (SMCWX) that holds the gaming equity.

That fund has $84.45 billion in assets under management, and invests in domestic and foreign growth stocks with market values of up to $6 billion at the time of inclusion. That means SMCWX is home primarily to small caps and smaller mid-cap equities.

The strategy’s immense investment universe plays to its strengths. Its managers distill the 6,000-stock MSCI All Country World Small Cap Index into a 700-800 stock portfolio by dividing and conquering. Under American Funds’ multi-manager framework, this strategy’s 17 managers ply their preferred styles in their own sleeves, provided they target firms with market caps between $500 million and $6 billion,” according to Morningstar.

The research firm has a “silver” rating on the fund. At the end of the second quarter, Kindred stock accounted for 0.21% of the fund’s weight. SMCWX holds other gaming equities, including DraftKings (NASDAQ:DKNG) and Entain Plc (OTC:GMVHY).

Kindred Stock Bet Could Payoff for Capital Group

It remains to be seen if the Kindred takeover chatter gains momentum. But the company has some exposure to the US, the fastest-growing sports wagering market in the world.

The Unibet brand holds licenses in Arizona, Indiana, Iowa, New Jersey, Pennsylvania, and Virginia, according to the Kindred website. Across sports wagering, iGaming, poker, and bingo, Kindred believes the global markets for those segments will sport nine percent compound annual growth through 2025.

“Kindred is the world’s fourth-largest online gambling operator in terms of Gross winnings revenue, and has nearly 30 million registered customers across many countries. Our revenue is diversified, both from a product and a geographical perspective, which provides a stable base and multiple growth opportunities,” according to the company.