Light & Wonder’s stock dives after Aristocrat’s court win

Garance Limouzy September 25, 2024

Light & Wonder‘s (L&W) stock value plunged after a U.S. district court granted a preliminary injunction in favour of competitor Aristocrat Leisure, effectively prohibiting L&W from selling its popular Dragon Train slot machine. The ruling comes just weeks before the Global Gaming Expo in Las Vegas, where L&W had planned to showcase the game.

Trade secrets

U.S. District Court Judge Gloria Navarro concluded that Aristocrat is “extremely likely” to prove that L&W misappropriated trade secrets while developing Dragon Train. As a result, the court has barred L&W from any further commercialisation of the game, which includes sales and leasing activities.

L&W plans to appeal the decision

In response, L&W has announced its intention to appeal the decision. “We respectfully disagree with the judge’s ruling and will file an appeal promptly,” the company stated. L&W insists that its diverse portfolio of gaming products will help mitigate any potential losses associated with Dragon Train, which they estimate to contribute less than 5 percent to their projected adjusted EBITDA of $1.4 billion for 2025.

“We have the best game design talent in the industry, and they are creating great games across all our channels,” said Matt Wilson (pictured above), President and CEO of Light & Wonder. “We are excited about the new games we will be featuring at the Global Gaming Expo in October. We expect our strong growth trajectory to continue, notwithstanding this decision. We have built an amazing business and a solid financial foundation over the last several years with great teams driving our success and are highly confident in our future of continuing innovation and ability to achieve our stated 2025 $1.4 billion Targeted Consolidated AEBITDA.”

Market’s reaction

Despite maintaining its earnings guidance, the market reacted negatively to the ruling, with L&W’s shares dropping significantly. On the Nasdaq, the stock plunged nearly 19.5 percent, closing at $90.71 on Tuesday 25 September.

Analysts from various firms have adjusted their forecasts for L&W’s revenue. E&P Capital has downgraded its adjusted EBITDA projections for the company, while JP Morgan and Goldman Sachs maintained positive ratings but lowered their price targets. The consensus among analysts seems to suggest that while this ruling presents challenges, L&W’s strong market position and diverse offerings may cushion the financial impact.

Aristocrat celebrates court’s decision

Aristocrat Leisure celebrated the court’s decision, with Chief Product Officer Matthew Primmer stating, “This ruling highlights the importance of our intellectual property and our dedication to safeguarding our business.” The company’s lawsuit, initiated in February, accused L&W of infringing on trade secrets related to its own successful slot games, including Dragon Link and Lightning Link.

In addition to the injunction from the U.S. court, Aristocrat has also sought legal remedies in Australia against L&W. Observers note that disputes over intellectual property rights are not uncommon in the gaming industry, and there may be potential for both companies to reach a settlement in the future.