Online betting group 888 Holdings, the owner of William Hill, has said its licence to operate in Britain is under review, after a dramatic intervention from the Gambling Commission that derailed a leadership bid from three gambling industry veterans.

Shares in the London-listed online casino and bookmaking business slid by more than 25% after it issued a lengthy statement that spooked investors.

The company said that it had broken off talks with the prospective leadership trio in the light of questions from the industry regulator about their previous roles at rival gambling firm Entain, which is the subject of an HM Revenue and Customs investigation into alleged offences including bribery.

The statement prolongs a period of tumult that began in January, when 888 removed longstanding chief executive Itai Pazner, amid an internal investigation into a failure to follow anti-money-laundering processes.

It has since been searching for new leadership and looked like it might have found it in the shape of FS Gaming, a vehicle launched by the three former executives from Entain, the owner of Ladbrokes.

FS Gaming bought 6.5% of 888 in June and proposed the installation of Lee Feldman as chairman and Kenny Alexander as chief executive, reprising their former roles at Entain, with former Entain senior independent director Stephen Morana as finance chief.

The investment is understood to have triggered interest from the Gambling Commission.

The regulator pointed to Entain’s admission that it was in talks with the Crown Prosecution Service about a deferred prosecution agreement, relating to alleged offences including bribery in its Turkish operations, during the period when Alexander, Feldman and Morana were at the company. Entain, which was previously known as GVC, said in May it was likely to incur a “substantial financial penalty” as a result of the investigation, which also involves HMRC.

Alexander was also fined £1,000 in 2021 for stealing a takeaway driver’s van outside a kebab shop and driving off with it, during a night out. This is not thought to have been a factor in the Gambling Commission’s intervention.

888 said the Gambling Commission had asked to be kept informed of discussions with the men.

A letter to 888 from the regulator, a copy of which the Guardian has seen, shows that it subsequently warned that 888’s licence could be at risk if the FS Gaming proposal went ahead.

The regulator said it wanted to know if any of the trio were suspects in the HMRC investigation, had been interviewed under caution or were suspects in any other investigation.

888 Holdings said it had asked FS Gaming for any information that could help allay the regulator’s concerns but that “the most basic assurances that addressed these concerns were not forthcoming”.

It said the Gambling Commission had advised that anyone seeking a leadership position would require a personal licence and that the regulator would consider “the existence of an ongoing criminal investigation”.

“The [Gambling Commission] strongly recommended that the board, as well as all shareholders, give very serious consideration to the above factors before acting,” it said.

On Friday, the regulator said that it had launched a review of the company’s licence.

888 has now broken off talks with the trio about their proposal to run the company, saying it could not put its licence to operate in its biggest market, Great Britain, at risk.

There is no suggestion of wrongdoing by any of the men.

Jon Mendelsohn, the Labour peer and executive chairman of 888, said: “We will be fully cooperating with the […] review, arising from potential issues with respect to FS Gaming’s investment and proposal, and look forward to bringing the review to a conclusion expeditiously.

“As a board we devoted significant time to considering FS Gaming’s proposal.

“However, following in-depth regulatory due diligence including engaging closely with the GBGC [Gambling Commission], the board had no option but to terminate discussions as it simply could not put licences in our largest market at significant risk.

“While this engagement temporarily interrupted the very thorough search process to appoint a new chief executive, the board is finalising its appointment and expects to make an announcement in the very near future.”

A spokesperson for FS Gaming said: “We were completely surprised by 888’s statement and perplexed by how the company has orchestrated this as we remain relatively small public shareholders with no access to any non-public information and we were engaged in dialogue regarding the best strategy to maximise the value of these world-class assets. We will continue those efforts.”

The Gambling Commission said: “We do not talk about individual operators. In general, if any operator requests information on existing regulations then we will provide that as part of our drive to make gambling fair, safe and crime-free.”

The commission is understood to have begun asking about FS Gaming after press reports suggested that it was working with another shareholder, HG Vora, which holds a stake of more than 10% in 888.

Under the commission’s rules, the emergence of a party with a combined 10% stake constitutes a change of control at a licensed gambling operator, requiring a licence review.

888’s licence would have been automatically revoked if the change of control was not approved.