Good morning. On today’s agenda:

• Rank issues a profit warning on ‘softer’ UK consumer.

• PointsBet welcomes SIG as a new investor.

• Our startup focus is Maryland sports-betting operation Crab Sports.

The love boat. Click here:

Rank profit warning

• LFL underlying operating profit for the year to Jun22 will be £40m compared to the previously forecast of £47-£55m.

London not calling: The operator of the Grosvenor casinos casino chain in the UK said the performance post-April has been “considerably weaker than expected” due to the slower return of higher spending customers to its London casinos.

• Mr Soft: The company added that there was “continued softness” in visitor numbers in the rest of the estate.

• Lower win: It added that it also suffered a “lower-than-average casino win margin QTD.

• In line: Rank said the performance of its other business segments has been “broadly in line with management's expectations”.

Recall: Rank previously lowered its underlying profit expectations in April from between £55m-£65m. It means profits are now expected to be over 38% lower than the previous top-end estimates.

Analyst reaction: Peel Hunt said that “almost all the weakness is in Grosvenor, where capital investments continue in order to make the venues more attractive as post-Covid-19 demand patterns establish”. 

Diary date: Rank will announce its preliminary results for the 12 months to June on 18 August.

**Sponsor's message: Spotlight Sports Group (owned by Exponent Private Equity) is a leading technology, content and media business specialising in sports betting. Its industry-leading Superfeed is used by the biggest betting brands in the world including bet365, Flutter and Entain. The content engine powers on-site engagement by delivering impartial expert betting insight for 20 sports in 70 languages.

For more information visit: spotlightsportsgroup.com 

PointsBet’s new investor

If the hat fits: PointsBet is to issue shares worth A$94.2m to SIG Sports Investments Corp, an offshoot of the Susquehanna International which has become PointsBet’s largest shareholder with a 12.8% stake in the company.

• Who is SIG? The Pennsylvania-based SIG is a proprietary financial trading firm with business verticals encompassing derivatives market making, institutional brokerage, private equity, sports analytics and structured capital. 

There’s more: As part of the deal, Pointsbet’s Banach Technologies (also known as PointsBet Europe) has “entered into an exploratory agreement” with another SIG subsidiary called Nellie Analytics.

• Nellie Analytics will provide PBE with sports analytics and quantitative modeling services while the two will develop the terms for additional services before entering into a “definitive long-term agreement”.

• Who’s Nellie? The Dublin-based Nellie consists of ~30 technologists building quantitative models and technology to trade and make markets for professional sports using “trading acumen, advanced statistical forecasting models, and quantitative research”. 

What they said: SIG Co-founder and managing director Jeff Yass said that his company had been “evaluating” the North American sports-betting market for a number of years.

• Yass indeed: “We believe PointsBet has great potential for future growth and success in the North American sports betting market and SIG has both the analytics and capital to help realize that potential.”

• PointsBet chairman Brett Paton said “the cultural alignment between both organizations is strong”.

BetMGM/Carnival Cruises

Carry on cruising: BetMGM has teamed up with cruise operator Carnival to offer sports-betting and igaming products on board more than 50 Carnival-branded ships in international waters. The platform will roll out over the coming months.

• Press gang: BetMGM and Carnival said they will collaborate on co-marketing and promotional activations.

• Walk the plank: Adam Greenblatt, BetMGM CEO said it was “another great opportunity” to further expand BetMGM's footprint.

Offshore gaming: Casino gaming is already available on most Carnival Cruise ships featuring slots and casino games. According to international maritime law, international waters start 12 miles offshore.

• Boarding party: Marty Goldman, SVP for global casino operations at Carnival, said of the deal that the two companies would work on providing a “wide array of immersive digital content” as a complement to its existing exceptional shipboard casinos.

Diary date: Carnival Cruises will offer a Q2 update on June 24 where more info might be forthcoming.

Kindred exits Germany

Nein, danke: Kindred has said it is withdrawing from Germany as of July 1 citing an unworkable and uncompetitive regulatory situation. The company says it will hand in its license to operate under the Unibet brand, telling SBC News that for a licensing regime to work it needs to be “transparent, sustainable, and financially viable”.

• Nicht nachhaltig: Kindred went on to state that it deemed the German regime instituted by the Fourth Interstate Treaty on Gambling to be “not sustainable and competitive against the unlicensed offering”.

Not a big college town: Germany didn’t get a mention in either its Q1 or FY21 earnings statements. Up until the season just gone, Unibet was the official betting partner with Bundesliga teams Borussia Mönchengladbach and RB Leipzig.

The shares week

Risk off: Jim Chanos of the Kynikos hedge fund, appeared on the Bloomberg Odd Lots podcast last week and had some interesting commentary on the current market turmoil. Recall, Kynikos is short DraftKings, and his commentary helps cast some light on the hedge fund’s thinking.

• Shock tactics: Talking of the valuations of many of the new economy high-flyers, he noted that “what was sort of shocking” how much investors were paying for “in effect, the option value that the business would be worth something, you know, possibly someday, even though the business model was certainly unproven in 2020 and 2021”.

Disaster movie: He said Kynikos started to “see disasters” in the fall of 2021. “Things like Peloton and Robinhood and DraftKings; stocks that were suddenly darlings were suddenly down 50, 60, 70%, on perceived bad news.”

REIT warning: Chanos said he believes that one aspect of the current macro situation that investors are “not prepared for, still, is interest rates resetting meaningfully higher”. 

• Low returns: “So many business models that we look at are just extremely low return on invested capital”

• Absurd: “Just take almost the whole cross-section of Reits, (it) just seems absurd to us.”

• Risk factor: “I think that they've been seen as (being) defensive because they're not technology, but at this point they may have as much risk as the tech stocks.”

• The takeaway: “Those are going to be problematic going forward if rates drift higher, because again, people just are used to financing things at 2% and 3%, and those days may be over.”

Hiding in plain sight: Chanos also laid into the “disingenuousness in corporate America is happening right in front of you” when it comes to the use of self-defined metrics. 

• Off-the-books: “And the most egregious of which, of course, is adding back share-based compensation, which Silicon Valley is just lavish in using,” he suggested.

• The bottom line: “As long as we just pay our people in stock, that doesn't count. And I think that virtuous circle is going to turn into a vicious cycle on the way back down.”

Further reading: DraftKings and the stock-based compensation issue. Also, Jim Chanos v. Jason Robins, part 1 and part 2.

Further listening: Jim Chanos on why some of the worst hit parts of the market still have more pain ahead.

Startup focus - Crab Sports

Who, what, where and when: Crab Sports is a Maryland-focused sports-betting operator born in 2021 by a set of founders with long-standing backgrounds in gaming and finance. They believe it is possible to carve out a “differentiated and profitable niche” in the sports-betting market.

Funding backgrounder: The company is privately financed by industry figures and Maryland-based businessmen and women.

So what's new? Crab Sports and GiG recently announced their partnership, with GiG agreeing to provide their platform and newly integrated Sportnco sportsbook solution to Crab Sports in Maryland. The company is in the process of building out the product and striking deals with local brands within the state to execute on their local rewards strategy.

The longer pitch: “The people of Maryland are immensely proud of their state, whether it be their sports teams, their flag, Old Bay Seasoning or, of course, the local delicacy - Maryland blue crabs,” says Crab Sports spokesperson Derek Baker. 

• By creating a tailored local offering and rewards, underpinned by an entirely local customer support and operations team, Crab Sports hopes to create a compelling destination for sports betting that can't be matched by the national operators. 

• “We intend to live and breathe our 'for Maryland, by Maryland' ethos by partnering with local hero businesses, charities and events to create another brand that Marylanders can be proud of,” Baker adds.

Startup funding news

Guide price: Affiliate Sports Gambling Guides has announced $2m investment from iGaming venture capital firm, Astralis Capital. SGG only launched in 2020 and specializes in social media.

• Astralis Capital is a venture capital firm working in the digital gaming space via its Astralis Fund I LP, a digital gaming-focused Venture fund co-managed by Tisno Onggara and Evan Meya.

FATF grey list

Good news, bad news: While Malta was celebrating being removed from the Financial Action Task Force (FATF) grey list of jurisdictions, iGB reported that Gibraltar found itself added to the list as a result of failings linked to its gambling industry. 

• Ready Pleyer one: FATF chair Marcus Pleyer said “supervisors are not applying sufficient fines for anti-money laundering failings,” adding that “this is important as the gambling sector in Gibraltar is large and is aimed at foreign jurisdictions.”

• Warning: “Gibraltar needs to take a number of steps including focusing on gatekeepers to the financial system, including gambling operators and lawyers,” the FATF explained. 

Off-white: Malta had been added to the gray list in June 2021 when it was told to follow a three-point “action plan” focused on ensuring accurate information about beneficial owners and strengthening the role and actions of its Financial Intelligence Unit. The island was removed from the gray list in the last two weeks following a visit by FATF officials. 

• Work to do: “That doesn’t mean there isn’t more work to do,” Pleyer added. “Going forward, the FATF strongly encourages Malta to continue improving its system.”

Share Wagers.com Earnings+More

The week ahead

The only diary item of note this week is the Jefferies Global Consumer Conference where MGM and Rush Street Interactive are set to speak. Jefferies analysts said the key focus for gaming from the conference will be what visibility Vegas operators have beyond Q3.

Jefferies: “As indicated in our recent management meetings, there appear to be no signs of deceleration in the next two quarterly reports, although history suggests that rapidly rising interest rates and inflation foretell recession.”

Balance sheet evaluation: They add that with the elevated and rising cost of capital, “companies with balance sheets on all levels should be thinking differently about resources”.

• This includes refinancing, funding growth projects, M&A and the timing and magnitude of capital returns.

Streaming: On Friday this week, sector watch will take a look at recent developments in sports streaming including the recent rights deal for the IPL where a company led by James Murdoch won the digital rights and Apple’s move into MLS.

Datalines 

Spain Q122: GGR was down 14.8% YoY, but up 16.3% QoQ to €204.4m. Stakes were up 5.3% YoY to a record €7.4bn, player deposits rose 4.3% YoY and or 7.1% QoQ to €769.8m. Sports-betting handle increased 10.6% YoY to €3bn but GGR was down 40.9% YoY to €65.2m, although it was up 49.1% QoQ. 

• Margins were particularly low at 2.1%. Online casino recorded revenues of €111m, a YoY increase of 11.5%. 

• Ad ban impact: marketing expenditure fell 27.7% to €107.9m, although affiliate marketing jumped 84% to €22.7m.

Denmark Apr22: GGR hit an all-year of DK609m in April, a YoY rise of 15.1%. Sports-betting GGR was down 16.5% YoY but up 43.2% to DK222m while online casino GGR was down 14% YoY but up 7% MoM to DK242m. Land-based casino revenue was up DK1m MoM to DK35m in April.

Newslines 

Churchill Downs has closed on the sale of 115.7 acres of excess land near Calder Casino for $291m to a Blackstone company called Link Logistics.

EBET has closed its private placement of 977,657 shares for gross proceeds of approximately $3.5m. 

Raketech has extended its revolving credit facility of €15m with Avida Finans AB up until September 2023. Interest on the facility is EURIBOR plus 4.25% and an additional upfront extension fee.

Bragg Gaming will supply its gaming content to three of SkillOnNet’s consumer brands, SpinGenie, PlayOjo and SlotsMagic in the province of Ontario. 

888Africa has appointed Sorin Nichita as its new VP of performance marketing. Prior to joining 888, Nichita was head of online marketing at Goat Interactive. 

What we’re reading

So your startup died: survival tips from the digital frontier.

On social

Alfonso Straffon 🇨🇷🇺🇸🇲🇽 @astraffon

Deck Prism (Huddle), Angstrom, Banach, Nellie Analytics (Susquehanna)... who ya' got?

June 20th 2022

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Calendar

• Jun 20: Rush Street Jefferies conference chat

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com