Good morning. On today’s agenda:

• 888 is struggling to find investors for its bonds, according to reports.

• Las Vegas continues to defy the macroeconomic pessimists.

• Our startup focus for this week is Sports Gambling Guides.

Independence day. Enjoy July 4.

888’s bond woes

Dr. No: Reports in the FT suggest the banks backing 888’s recent £1bn bond and loan offering are struggling to find buyers for the new debt. JP Morgan and Morgan Stanley initially underwrote the debt but are apparently struggling to find buyers despite the ~10% yield.

• How high? The FT wrote that “tepid demand” means the bonds will have to be priced “even higher”.

• Delay: JP Morgan issued a statement on Friday, when the sale was supposed to close, saying it would be delayed until the middle of this week.

• Do it yourself: The banks have already taken on £760m of 888’s debt rather than offer it to investors.

No time to die: One unnamed bond fund manager quoted in the piece said “it’s impossible to take a view on this credit before the government white paper is out”.

Quantum of solace: The news of the bond sale struggles spoiled the party as 888 officially closed on the William Hill deal on Friday. The company confirmed that Itai Pazner will continue as CEO with Yariv Dafna as CFO, Vaughan Lewis as chief of strategy and Guy Cohen being COO.

The world is not enough: 888 will next report in early August with four segments: 888 (including the US), William Hill online UK, William Hill retail UK and William Hill international.

• Recall: 888 got a £250m discount on the price paid for William Hill meaning it paid a total of £584.9m. It partly paid for the deal with a rights issue which raised £159m.

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As a proud sponsor of Earnings+More, Yolo Investments wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat.

The shares week

Glass half full: UK-listed betting and gaming stocks were in the spotlight last week following reports of what was likely to be included with the UK government’s gambling white paper as investors deemed that - at least as far as the rumored proposals were concerned - the sky was’t falling in after all.

• And the winner is: The news of its struggles to find buyers for its upcoming bond issue came too late to halt the advance of 888 which enjoyed a 5.8% rise on the week as it officially closed its deal for William Hill’s international business.

• Top rank: Rank also enjoyed a decent run with its shares ending the week 2.6% as investors warmed to the potential for it to gain machines at its land-based casinos.

• Moving the dial: Both Flutter and Entain still ended up down on the week although both saw an uptick at the end of the week.

The bottom line: Sentiment remains against the UK-listed gaming stocks and it clearly isn’t the white paper overhang but broader fears over where the consumer will be in six months’ time.

Las Vegas analyst updates

Not feeling it: On the back of meetings in Las Vegas, the team at Truist report that most managements reported no impact as yet from gas price inflation on Strip visitation and customer spend. The “common theme”, they suggested, was ”gaming’s resiliency to recessionary conditions”.

• Conference circuit: They noted that “Vegas meetings are back” with solid convention booking for the second half. The event calendar - including F1 in Nov23 and the opening of the MSG Sphere next year - “is driving a strong outlook”. International travel “upside’, meanwhile, will come in H2 and into next year.

Caution horses: Responding to last week’s data, the Macquarie team suggested it was appropriate to take a “more cautious outlook” after what appears to be a strong summer.

• Be prepared: “Overall, we believe casinos are better prepared to handle a downturn than prior cycles with leaner cost structures (e.g. record margins) and an overall market that has seen little new supply over the last decade,” Macquarie added.

Pay the piper: Meanwhile, in Atlantic City the possibility of strike action was averted late last week but the team at Regulus there is “no doubt that pay increases will be brutal for some gambling companies”.

Opportunity cost: The problem, they suggest, is that for two decades the pace of macro change has “let indifferent companies offering indifferent products staffed by indifferent employees off the hook, absent major regulatory change”.

• Dynamo: But that has now come to an end and with a clear differentiation now likely between “dynamic businesses” that treat staff and customers well and others that attempt to protect the bottom line.

• Up the workers! “The current state of near full employment and fragile governments means the power is definitely with the workers. Pay increases will create risks as well as rewards; resisting them is likely to make everything worse.

DraftKings fined for Ontario advertising breach

Ad breach: The Alcohol and Gaming Commission of Ontario (AGCO) has fined DraftKings CA$100K for breaching its advertising rules on inducements and bonuses.

• Operators are allowed to advertise credits or boosted odds on their websites, but not on mainstream media platforms.  

• AGCO said DraftKings’ promotion was distributed widely via television and social media channels despite clear “restrictions on the advertising of inducements, bonuses or credits”. 

Unibet Dutch football sponsorship criticized 

Ajax criticism: Unibet’s recently-announced betting partnership with Holland’s most famous football club Ajax Amsterdam has been criticized by the country’s mental health industry association. The trade body said the sponsorship was “at odds with all efforts to combat gambling addiction”. 

• Dutch media have also reported that Minister for legal protection Franc Weerwind is working on “a legal ban on ‘untargeted’ advertisements” of gambling products. 

• ‘Untargeted’ advertisements” are marketing messages that users have not actively searched for

Lower league sponsorships: Unibet received its license to operate in the Netherlands in early June and recently signed sponsorship deals with second division football clubs Telstar and De Graafschap. 

Macau analyst update

Bleak house: The news last week that Macau recorded its lowest monthly GGR since Sep20 and the re-imposition of tougher Covid measures “highlights the inherent uncertainty of the Chinese government’s strict zero-tolerance COVID policy,” suggest the team at Macquarie.

• Hibernation: They added the recent news “makes it clear to us that strict travel restrictions will make 2022 a transition year with minimal free cash flow”.

• Stat: The Macquarie team noted that visitation to Macau in the YTD was just 18% of 2019 levels.

Forecasts: Macquarie now forecast 2022 Macau GGR of $8.9bn, down 76% on 2019 levels. For 2023, they expect revenue to reach $23.9bn, or 35% below 2019. 

Earnings in brief

Betfred: The unlisted UK operator has released its figures via Companies House showing turnover for the year to Sep21 static at £525.9m but operating profits tumbled 75% to £24.6m due to a sale of investments resulting in a loss of £22.7m in fair value. 

• Swings and roundabouts: The company maintained its overall gross revenue despite the closure of its LBO estate over the period. It said the shortfall was made up by boosted online operations. 

• Platform change: Betfred has switched from Optima to the OpenBet technology platform for its launch in Iowa. The group said the move would simplify operations by moving everything onto the same platform.

Tab New Zealand May22: Turnover was 3.6% below target at $124.3m, GGR of $32m was 4.4% below target. Gross margins of 15.8% were 0.1% below budget. Monthly profit of $10.8m was $2.4m below expectations. The group said: “Turnover dipped against budget in May, softening economic conditions also played a factor as customers adjusted to the rising cost of living.”

Datalines

New York week ending Jun 26: GGR came in at $15.8m on handle of $218.9m. FanDuel grabbed 49.7% of that while DraftKings was worth 23.2% followed by Caesars (14.2%) and BetMGM (8.1%).

Colorado May22: Sports betting handle was down 8.2% MoM at $392.3m, but GGR was up 20% to $27.1m with margins at 7.5%. Promotional credits and deductions came to just above $10.5m, bringing the taxable revenue to $16.6m, the second-highest total since sports betting was regulated in the state. Colorado received nearly $1.7m in taxes in May.

Virginia May22: Despite sports betting stakes being down 12% MoM to $351.5m, GGR was up 17.3% to $42.5m and GGR margins were 12.1%. Promotional credits for the month came to just under $10m and a further $5m from other deductions brought adjusted GGR to $27.5m, on which Virginia collected $3.9m in taxes.

Startup focus - Sports Gambling Guides

Who, what, where and when: New York-based Sports Gambling Guides was founded by father and son duo Mark and Troy Paul in 2020, hoping to “rewrite the affiliate marketing playbook” by making social media its number one driver.

Funding backgrounder: SSG closed its most recent round of funding in May, raising an additional $2m with notable backers including Astralis Capital, a venture capital firm dedicated to identifying transformative businesses in the digital gaming space.

So what’s new? In August, SGG will launch a $5m funding round on StartEngine.com, making it the first ever privately-held sports gambling company to open for public investment.

The longer pitch: SGG operates one of the largest social media databases in the US with a network of over 800 sports content creators reaching a combined audience of 22 million and includes such names as DraftKings, FanDuel, Fanatics and DFS site PrizePicks among its client base.

• Generation game: “The younger generation is getting all their sports scores, information and video content from Instagram, Twitter, TikTok, Twitch, YouTube and other social media platforms,” says co-founder Troy Paul. “It’s more fun and all in real time.” 

• Paradigmatic advertising: SGG says it is “challenging that paradigm” of marketing by harnessing the power of social media to deliver a “traceable, cost-effective marketing solution”.

• SGG is currently licensed in all 17 legal online betting states in the U.S. and will be looking to expand into more as and when new jurisdictions open up.

Newslines

Sportradar has launched ORAKO, its new “all-in-one” sportsbook solution aimed at operators wanting to launch an omnichannel sports betting service regardless of their stage in the business life cycle. Sportradar offers the solution as a full- or part-managed service. 

Genius Sports has expanded its product offering with Tipsport by increasing the number of features it supplies to  the Czech sportsbook. The group will provide extra feeds and pricing on the NFL, Euroleague basketball and English Premier League events.

Penn National Gaming closed down theScore Bet’s US operations on Friday and is redirecting stateside players to its Barstool Sports brand. As previously announced, the group will focus theScore Bet’s efforts on Ontario. 

What we’re reading

Paying the price: Jonathan Bierig, co-founder of Ultimate Odds, on whether sportsbook marketing has gone too far: “Sportsbooks have created a crazed bidding war for users and have driven the CAC (Customer Acquisition Cost) through the roof.”

Bears savage Robinhood: the listed day-trading app is under pressure.

Calendar

• July 7: Entain Q2

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com