What Happened:
Shares of gaming products and services provider Light & Wonder (NASDAQ:LNW) fell 19% in the morning session after a U.S. district court (District of Nevada) granted competitor Aristocrat a preliminary injunction relating to L&W's Dragon Train game. In this case, the preliminary injunction could prevent Light and Wonder from performing certain activities (which could include activities that affect monetization) related to the Dragon Train game. Notably, the company announced plans to work on new iterations of the Dragon Train franchise consistent with the terms of the Court's ruling.
To provide some clarity to investors about the potential impact of the ruling on its business, L&W reaffirmed its 2025 $1.4 billion adjusted EBITDA guidance. It further clarified that, pre-ruling, Dragon Train represents less than 5% of the $1.4 billion EBITDA estimate. However, Light & Wonder plans to appeal the decision, creating an air of uncertainty that the market doesn't like.
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What is the market telling us:
Light & Wonder’s shares are quite volatile and over the last year have had 5 moves greater than 5%. But moves this big are very rare even for Light & Wonder and that is indicating to us that this news had a significant impact on the market’s perception of the business.
Light & Wonder is up 12.5% since the beginning of the year, but at $91.62 per share it is still trading 18.7% below its 52-week high of $112.68 from September 2024. Investors who bought $1,000 worth of Light & Wonder’s shares 5 years ago would now be looking at an investment worth $3,989.
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