How your portfolio can bet against gambling ads

Nine years ago, Australia made global headlines for all the wrong reasons. A study found that the country had the highest number of gamblers in the world.

Eight in 10 love a bet; and they're not just one type of person but Aussies from the ages of 18 and 44. The country was second only to the US mecca of Nevada in terms of the number of poker machines relative to its population.

Fast forward to June of last year, a parliamentary inquiry on the hazards of online gambling released a damning report.

Things have gotten much worse, and gambling addicts much younger, to the point that the Murphy report, named after the late MP Peta Murphy who headed the inquiry, released a string of recommendations.

This included a complete ban of gambling ads on all major TV networks and radio stations over three years (to allow media companies to source alternative advertising revenues).

But instead of following the recommendation from the Murphy report, the Albanese government this week announced that it would implement a partial ban instead of a complete ban. The partial ban means that the number of gambling ads aired during primetime will be capped and no gambling ads could be aired near or during children's TV shows.

The public backlash was immediate. And a small group of investors came up with another way to push ahead with more drastic reforms.

A broking platform for the good guys

A new fintech trading platform called Sustainable Investment Exchange (SIX) was launched last month with a specific purpose. It aims to rally concerned citizens who want to use their investment know-how to clap back at companies that are not doing the right thing by the community.

In this case, SIX co-founder Adam Verwey says they have made shares in Nine Entertainment (ASX: NEC) and Seven West (ASX: SWM) available in their platform for people to purchase and officially make them shareholders of both companies. Once there are 100 shareholders on board, SIX can then facilitate putting through an AGM resolution on their behalf.

"Time and again, Australia's biggest companies have shown that they only care about one group of people, their shareholders. So, if we want to make change at some of Australia's biggest companies, then we need to do it as owners of those companies," says Verwey.

"Shareholder resolutions at company AGMs are commonplace overseas, but are rarely used in Australia due to our strict Corporations laws, which require 100 shareholders to propose a resolution."

This is why hitting the 100 target is critical to the group's success. Verwey says that when it happens, it will be the first time shareholders would be mobilised to propose shareholder resolutions at Seven and Nine.

"The proposed shareholder resolution demands the removal of all gambling advertisements from the company's television, radio, streaming, digital and publishing platforms," he says.

What's at stake 

On the flipside, a total ban would place both media companies under more revenue strain. Media watchdog, the Australian Communications and Media Authority, found that $238 million was spent on gambling advertising last year.

Both companies are already under intense pressure due to weaker market conditions. In their latest results announcements, Seven West's first-half earnings (group EBITDA) dropped 40% to $124 million while Nine Entertainment's group EBITDA fell 15% to $316 million compared with the same period a year ago.

UBS had a 'buy' rating on Nine in its August 2 sector report and a 'sell' rating on Seven following its results announcement today.

However, proponents of the complete ban argue public welfare is more important. Around $25 billion are lost to gambling each year. Seven in 10 Aussies don't want to see gambling ads on air, according to the Australia Institute.

"The torrent of advertising is inescapable. It is manipulating an impressionable and vulnerable audience to gamble online," said the late Peta Murphy when the inquiry report was released.

"Gambling advertising and simulated gambling through video games is grooming children and young people to gamble and encourages riskier behaviour."

Ethical investors leading the charge 

So far, Verwey says they've gotten the support of financial planning firm Ethinvest, impact investor Reichstein Foundation and the Future Group, the parent company of several super funds including Childcare Super and Verve.

There are also 300 trading accounts on the SIX platform since it opened last month.

"We're hoping to get 1000 trading accounts in our first year and hit 100,000 within five years," says Verwey.

Once the platform takes full flight, Verwey believes they'd be able to keep using the same template of getting 100 shareholders to band together and ensure listed companies improve their social and environmental performance.

For now, he hopes to get enough shareholders by the end of this month so they can push ahead with the resolutions when Seven West and Nine Entertainment both hold their AGMs in November.

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