Making things happen: activist investors flex their muscles
Making things happen: activist investors flex their musclesChange makers, FDJ/Kindred reaction, New Jersey’s surprising November +More
Change, like the sky, like the leaves, like a butterfly. Change makersHigh-profile activist investor efforts are reshaping the sector. Chalk ’em up: There is no denying the impact of activist investors in the betting and gaming space after two high-profile ‘wins’ for those hoping to reshape and reposition key players in the space, setting the scene for more actions in 2024.
Can you feel it now? Penn Entertainment, 888, PointsBet and Bragg Gaming are four further recent examples where activist investors have gone public with complaints about strategic directions – highlighting how investors feel emboldened in thinking they can effectively agitate for change.
Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem. Activists on the marchChange is gonna come: The success of Eminence and Corvex in their campaigns at Entain and Kindred respectively comes against a backdrop of a wider increase in shareholder activism in the past year. This is backed up by two recent surveys.
Notably, the report found that in Europe two-thirds of first-timer campaigns focused on challenging announced M&A transactions or advocating for sale/divestitures as a path to unlock value; while the number of board seats won globally rose 13% YoY to 122.
Laying the foundations: A second report from experts at consulting firm Alvarez & Marsal put some flesh on the numbers, suggesting the foundation has been laid for further activist campaigns in the year ahead. Fix you: Its Activist Alert Outlook for 2024, published earlier this month, suggested that among the six major themes that would drive an increase in activist campaigns this year was a strategy of pushing for M&A actions and, while the deal market remains subdued, the campaigns often have a mindset of “if you can’t sell, fix.” This plays into the other themes identified by A&M, including:
A seat at the tableBoard games: Until yesterday’s news from Kindred, the most outwardly successful activist campaign concerns the troubled Entain after it recently gave shareholder Eminence Capital’s CIO Ricky Sandler a seat on the board and apparently a substantial say on who will be the next CEO.
Similarly, hoping to influence events from the top table is HG Vora, which is seeking at least a couple of board posts at Penn Entertainment – and has said it is willing to go the proxy battle route should it not get its way.
Check the guy’s track record: Sources close to HG Vora’s thinking suggested the company is worried about the board’s track record on capital allocations, given what it sees as the value-destructive acquisitions of Barstool Sports and theScore. It is now worried Penn will “fumble the ball” from a promising start with ESPN Bet. Disruption aheadRumble fish: As noted earlier, the suspicion is that 2024 will see more activist investor actions. According to one fund source, the economic backdrop has changed to such an extent that boards and management are now more constrained and unable to buy their way out of trouble.
Gloss paint: Under the circumstances that occurred at the time of the pandemic, some “very, very bad decisions were glossed over when times were good. “And when all of that is laid bare suddenly, there’s a bigger demand for accountability,” said an advisor source.
The hindsight fund: This is where the activists step in. With the era of cheap money in the rear-view mirror, 20/20 hindsight is a powerful force and investors – particularly activist investors – have it in abundance.
FDJ/Kindred reactionThe state we’re in: Titling their reaction to the news of FDJ’s $2.8bn all-cash offer for Kindred ‘L’etat c’est moi’, the team at Regulus highlighted the importance of FDJ’s position as a lottery monopoly as the company moves to try and cement a stronger position in its home market. Bolster: FDJ, the analysts contended, has a “desultory” ~11% share of the competitive online French market “despite being able to leverage a strong brand, ubiquitous distribution, lottery cash flow,and a land-based betting monopoly.”
Prêt à porter: Adding Kindred’s ~12% share of the market – while not enough to raise competition concerns – would give FDJ a “compelling” 23% of the market. “Kindred is therefore a perfect fit for FDJ in France,” the team added.
Française des-truction: Despite the $2.8bn price tag, Regulus suggested adding Kindred to FDJ produces only a 17% revenue increment – FDJ delivers ~€6.6bn in annual revenues and €600m in EBITDA. “The acquisition is therefore relatively low risk and easy to digest financially for FDJ,” they ssaid.
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Matchbook B2B - Because the best price is for everyone. Visit http://www.matchbook.com/promo/b2b or get in touch at b2b@matchbook.com New Jersey’s surprising NovemberThe hold steady: Hold in November in New Jersey tracked the weakness seen across the market. No surprises there. After all, sporting results are results across the board. 🏈 New Jersey hold tracks the rest of the market Against the odds: Yet, as the team at Deutsche Bank noted, New Jersey’s monthly handle notably outperformed the peer group and was the cause of a “material outperformance” in GGR.
🔥 New Jersey outperforms on GGR growth in November +More analyst takesMacro: “Net-net, the macroeconomic outlook for gaming doesn’t look particularly great, but we don’t think it looks particularly grim either,” said the team at Truist in a recent analysis of trends in REIT investment.
Rate my goal: Given the rate environment, the team said they expected most companies in the gaming space to continue deleveraging. “Most economic forecasts show rates continuing to decline, though we think much will depend on how economic data presents over the next quarter,” they suggested.
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EveryMatrix delivers iGaming software, solutions, content and services for casino, sports betting, payments, and affiliate/agent management to 300+ global Tier-1 operators and newer brands. The platform is modular, scalable, and compliant, allowing operators to choose the optimal solution depending on their needs. EveryMatrix empowers clients to unleash bold ideas and deliver outstanding player experiences in regulated markets. An +More Media publication. For sponsorship inquiries email scott@andmore.media. |
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