Jun 13: Questions posed by Everton’s Stake.com shirt deal

Stake.com/Everton sponsorship, FanDuel’s Howe speaks to the WSJ, 888 analyst update, AGS analyst update +More

Wagers.com Earnings+More

Jun 13

Good morning. On today’s agenda:

Stake.com courts controversy with Everton FC shirt sponsorship.
FanDuel’s Howe rules out College sponsorships.
Our startup focus for this week is Huddle Tech.

The story of the blues. Click here:

Stake.com/Everton sponsorship

Less than ideal: The timing of Stake.com’s record-breaking £10m-a-year deal with Everton head of the UK government gambling white paper which is reportedly set to ban gambling company soccer shirt sponsorships has caused some questions in the press this weekend.

Everton FC CEO Denise Barrett-Baxendale said: “Stake.com is an ambitious organization with impressive growth plans and we’re all very excited to enter into a partnership with them at this stage in their journey.
This is the same Barrett-Baxendale who said in 2020 that “in an ideal world” Everton would not be sponsored by a gambling company, and would prefer “a different type of sponsor”.
Old habits: Everton was previously sponsored by controversial Kenyan-faced bookie SportPesa, a deal that was cut short in early 2020.
Community charge: At the time, the board faced questions from fans about how a gambling company sponsorship sat with the club's Everton in the Community scheme for mental health issues.

Backgrounder: Stake.com replaces Cazoo, the sponsor for the past two seasons that had a renewal offer turned down. It is licensed in the UK via a white-label agreement with Isle of Man-based TGP Europe. Last season it was the main shirt sponsor at recently-relegated Watford.

Further reading: The Sunday Times yesterday said the deal was “morally ambiguous and perverse”. The Athletic says Everton “had to be pragmatic” after its ties with Uzbek billionaire Alisher Usmanov meant the loss of £20m in sponsorship agreements.

** Sponsor’s message: Venture capital firm Yolo Investments is home to €551m of equity in more than 70 of the most exciting companies across fintech, gaming and blockchain. It continues to build one of gaming’s most dynamic portfolios as it eyes up seed and A-stage opportunities across the sector. Its dedicated 29-company, €183m AUM gaming fund already houses holdings in fast-growing suppliers and operators, including Kalamba Games, SimWin and ThriveFantasy. Yolo Investments is also on the lookout for LPs as it looks to scale new concepts, including its high roller live casino brand, Bombay Club.

FanDuel’s Howe in the WSJ

We’ve only just begun: Speaking to the Wall Street Journal, FanDuel CEO Amy Howe made the case for the company’s long-term prospects:

Amy Howe, FanDuel CEO: “What got FanDuel to where it is today is not necessarily going to be what gets us to potentially a $10bn company.”

This is Howe we do it: Speaking about FanDuel’s previously stated strategy of pushing further on the market spend when others pull back, Howe said the company was “leaning in so that we can build a bigger business by the end of the year”.

School’s out: Howe sees no place for gambling companies on campus. “We don’t want the FanDuel brand associated with college campuses,” she told the paper.

Change the record: The company is also re-evaluating the use of terms like ‘risk-free’ in its promotional messaging. “I certainly feel a huge sense of obligation,” said Howe.

Further reading: the full article.

888 analyst update

White noise: Assessing 888 ahead of the completion of the William Hill acquisition at the end of June, the team at Jefferies believes there is a valuation mismatch caused by fears of what might be proposed in the forthcoming (eventually) UK government gambling white paper.

Looking at 888’s exposure to the rumored £2 stake limit on slots, the team suggests the 888/William Hill combined business could see a £55m impact on slots revenues or c.15% negative drag.
Big drag: Jefferies estimates the negative EBITDA drop-through to be worth ~£16.6m. This is far less than the current valuation would imply, the Jefferies team suggest.

By its own merits: Jefferies put forward a brief crib sheet for why they feel the deal has “strategic merit”, pointing to diversification by geo and product, cross-sell potential, £100m of cost-saving, “material potential” revenue synergies, a more efficient balance sheet and scale.

The shares week

Heavy weather: Major gaming stocks were caught in the crosshairs as the worsening US inflation backdrop hit markets towards the end of last week.

Taking the hit: Caesars fell over 9% on Friday and was down nearly 12% on the week while MGM fared slightly better, down 7.4% Friday and off 9.5% on the week. Similarly, Wynn fell over 9% on the week.

Bally’s rallies: Suffering from multiple negatives at present is Bally where the news on the US, allied to fears over the impact of the UK government’s gambling white paper, have combined to push the stock down over 37% YTD.

The latest in a series of brief recoveries came to end on Friday as Bally gave up all its gains from late May to end Friday down over 8% on the day and 14.5% down on the week.

Jefferies’ digital matrix

Song remains the same: The top three remain unchanged at the head of Jefferies digital gaming brand survey with FanDuel leading the way followed by DraftKings and BetMGM.

Bet365 advances: There is some movement below the top three with bet365 being notable in its advance from 7th to 5th while in terms of momentum, it rises from 8th in April to second overall in May.
Ontario: Jefferies doesn’t ascribe any reason for the bet365 shift but the suspicion is the Ontario relaunch may account for the change.

AGS analyst update

Ever so ‘umble: The team at Macquarie attended AGS’s “customer appreciation event” at the Seminole Hard Rock in Florida and came away impressed by the company “humble, customer-first” attitude.

Willing them on: The Macquarie team said AGS remains “best-in-breed from a culture and workplace standpoint”, attracting talent and customer orders as “people want to work there and customers want them to win”.

The beat goes on: Macquarie noted that Q1 was AGS’s 18th consecutive earnings beat and its fifth consecutive quarter of sequential growth in machine sales. “Momentum appears to be continuing,” they suggested.

Resilience: They noted that customer demand remained resilient despite poor market sentiment, gas prices up ~50% and the S&P down 18% YTD.
Supply chain: “Everyone is keeping a close eye on this for the near term,” Macquarie noted.

The week ahead

Time marches on: The Playtech takeover saga could be resolved this coming Thursday, June 17, when bidder TTB Partners has until market close on the day to make a definite offer. Playtech told the market in late May it was “conscious that TTB has been considering a possible offer for Playtech for 15 weeks”.

Sector watch this coming Friday will look at sports data and the upcoming IPO of Connexa Sports, a “connected sports technology company built around Watch, Play, Learn commercial strategy”.

Startup focus - Huddle Tech

Who, what, where and when: Huddle Tech is the result of the merger of in-play odds specialist Deck Prism Sports and Huddle Gaming and provides trading, odds and risk management services to online sportsbooks. It was founded by Francesco Borgosano, Leo Gaspar and Jesse Wachtel; DPS co-founders Ed Miller and Matthew Davidow take up CTO and VP of Innovation roles.

Funding backgrounder: Huddle Tech announced a strategic investment from Las Vegas Sands at the end of last week for an undisclosed amount. Prior to this latest investment, Huddle Gaming raised $3m in seed funding in Dec20. The lead investor was Czech Republic-based Emma Capital, which also has stakes in Greek operator OPAP and Casinos Austria.

So what's new? Huddle Tech is live with around 10 sportsbook clients in North America and Europe, including brands like Sporting Group, Pinnacle, Betcris and Circa Sports.

The longer pitch: Borgosano says many in the Huddle Tech team have worked “for the largest B2C and B2B operators, which makes it easier for us to identify pain points and how to solve them”.

Borgosano adds that being a greenfield project helped a lot as it could “leverage a modern tech stack with our know-how in order to address these pain points from a get-go”.

Datalines

New York: GGR for the week to June 5 came in at $10.8m, down 22.2% and the lowest weekly handle to date. Handle was marginally lower at $270.7m.

Leaderboard: FanDuel once again grabbed the lion’s share with 62.6% of GGR followed by DraftKings on 25.2%. Caesars suffered by far its worst week with GGR falling to $171k (or less than 2%) on handle of $40.6m.

Iowa: Gaming GGR was down 5.1% to $150.6m for May leaving Q2TD GGR down 1.7% YoY. Compared to May19, GGR was up 15.1%

Sports-betting GGR was up 1.9% sequentially to $12.6m (and up 106% YoY) driven by a hold increase of ~150 bps MoM to 8.5%. Handle was down 16.6% MoM to $147.9m but up 28.8% YoY. handle mix was 90.8% online and 9.2% retail.
Leaderboard: FanDuel leads with $3.9m of GGRB followed by DraftKings ($3.1m), Caesars ($2.3m) and BetMGM ($1.6m).

Indiana: May GGR of $211.9m was down 4.1% YoY while on a quarterly basis, 2QTD was up 2.0% YoY. Versus 2019, May was up 10.4%. Penn’s two properties suffered worst, down 224% YoY to $32m.

Sports-betting GGR hit $30.7m, up 62.6% YoY and up 7% sequentially. Handle grew 21.2% YoY to $308.4m but down 14.4% sequentially.
Leaderboard: In AGR terms, FanDuel led the market with 41.4% followed by DraftKings (23.2%) share, BetMGM (14.3%), Caesars (11.1%) and Barstool/theScore (8%).

Missouri: GGR came in at $163.5m for May, down 5.6% YoY. On a QTD basis, 2Q22 MO GGR is down 2.6% YoY. Compared to May19, GGR was up 7.2%

Newslines

Gambling.com is set to join the Russell 3000 index. The inclusion on the index will take effect after the US market opens on June 27.

Stars in Ontario: PokerStars has received approval for a full product launch from the Alcohol and Gaming Commission of Ontario. It is thought it will launch later this month or next.

Why does it always reign on me? UFC and DraftKings will launch a new iteration of DraftKings’ ‘Reignmakers’ gamified digital collectibles franchise focused on UFC, allowing fans to build collections of their favorite UFC fighters and utilize them in games to compete for prizes.

EBET - formerly Esports Technologies - has announced a private share placement to raise $3.5m before fees.

Playgon Games: The mobile live dealer provider has signed through its distribution partner a software license and distribution agreement with global iGaming supplier Markor Technology.