The Light & Wonder Inc. (ASX: LNW) share price is taking a beating in afternoon trade.
After closing yesterday's session close to a record high, the ASX 200 stock is now in free fall and down 15% to $139.90 at the time of writing.
At one stage, the gaming company's shares were down as much as 24% to $124.62.
Image source: Getty Images
Why is this ASX 200 stock crashing?
Investors were hitting the sell button in a panic following the release of an announcement after lunch.
That announcement revealed that rival Aristocrat Leisure Limited (ASX: ALL) has put its lawyers to work to force a preliminary injunction against Light & Wonder's Dragon Train game.
Earlier this year, Aristocrat alleged that the Dragon Train game was infringing on the copyright and intellectual property of one of its most popular games, Dragon Link.
The lawsuit also highlighted that there are a number of former Aristocrat executives in senior leadership roles at Light & Wonder, two of which worked on Dragon Link and are believed to have helped with the development of Dragon Train.
Today, the ASX 200 stock revealed that Aristocrat had been successful with its latest legal push. It advised that it disagrees with the judge's decision and intends to appeal. It said:
Light & Wonder, Inc. today received an order from the U.S. District Court for the District of Nevada granting Aristocrat a preliminary injunction relating to L&W's Dragon Train game. We respectfully disagree with the judge's decision and will promptly file an appeal. We will continue to vigorously defend against Aristocrat's claims, including presenting our defenses to a jury at a trial.
Judging by the share price reaction, the market appears concerned that this could have a material impact on the company's near-term growth trajectory across its various operating segments. Light & Wonder supplies content to land-based cabinet operators, online casino Michigan and New Jersey digital platforms, and its SciPlay mobile gaming division. Management has been quick to reiterate its guidance for FY 2025.
Guidance reaffirmed
Light & Wonder has reaffirmed its FY 2025 targeted consolidated adjusted EBITDA of US$1.4 billion. Management notes that Dragon Train accounts for less than 5% of its expected earnings. It said:
We expect continued strong growth across all our businesses. The Company is moving forward on a number of key initiatives to mitigate the immediate impact and any continuing business disruption from today's order. Our pre-ruling estimate of 2025 Consolidated AEBITDA for Dragon Train was less than 5% of the $1.4 billion.
The ASX 200 stock's CEO, Matt Wilson, remains positive on the company's outlook. He adds:
We have the best game design talent in the industry, and they are creating great games across all our channels. 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.
