• “Nominal fee” plans to counter higher taxes ignites a social media storm.

• Caesars Entertainment sells WSOP to GGPoker owner for $500m.

• MGM Resorts shares catch a flat after ‘soft’ F1 comments.

• PointsBet earnings, Lottomatica call reaction.

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An expensive gamble

🧐 Up to a point Lord Copper: DraftKings plans a gaming surcharge for customers in high-tax states it announced alongside its Q2 earnings, which broke a long run of revenues ad adj. EBITDA beats. 

• The shareholder letter said the surcharge would apply in multiple competitor OSB states from January 1, including New York, Pennsylvania, Illinois and Vermont.

• The letter said the surcharge would be “nominal.”

Here’s what you could have won: In the earnings presentation published last night, it said the surcharge would be integrated seamlessly, “ensuring transparency by identifying the gaming tax surcharge directly in the bet slip.”

• DraftKings said the surcharge “could drive adj. EBITDA upside on an annual basis.”

Handing the competition an edge: But analysts at Deutsche Bank were skeptical. “From a competitive standpoint, if competitors aren't following suit, this feels like a potentially expensive gamble,” the team argued.

• “We find it hard to imagine a customer leaving a casino and having to square up taxes on their winnings with the casino prior to departure, without thinking maybe next time they will try a different venue.”

• JMP defended the decision, however, suggesting it was “creative” and “demonstrates how far the company is willing to go to protect profitability.”

Soak the rich: The letter cited the “significant” tax increase in Illinois, which at the start of July instituted a new tax regime that disproportionately affects the market leaders DraftKings and rival FanDuel. 

• The surcharge in Illinois would be set at a low to mid-single digit percentage of the net winnings a customer would previously have received.

• The Sports Betting Alliance warned in May that higher taxes might lead to worse odds or fewer promotional giveaways.

Cry foul: The company said it now faces the prospects of further tax increases in more states that would be “in excess of what we can absorb while still generating a reasonable profit margin and remaining competitive against the pervasive illegal market that pays no taxes at all.” 

👎 Look at the retweets: Such a unilateral move might well be unique in the global betting sector despite the company somewhat spuriously citing “higher tax jurisdictions such as Germany.” Certainly, the controversial move ignited an instant reaction from posters on X. 

• “This seems like it gives DK competitors a nice advantage, especially in Illinois,” said John Mehaffey from Vegas Advantage.

• When the going gets weird: “New feature coming to DraftKings in 2025,” said another poster. “Weird changes coming to the betting space,” wrote another.

Ups and downs: The news came with the Q2 numbers with revenue up 26% YoY to $1.1bn while adj. EBITDA came in 75% up at $128m which Truist noted was below their estimates. 

• But while the company upped its guidance for FY revenues to between $5.05bn-$5.25bn, it cut its adj. EBITDA guidance to between $340m-$420m vs. $460m-$540m previously.

• Macquaries analysts said the cut to guidance “was not a surprise” given the Illinois situation. 

Giving it back… to shareholders: DraftKings reiterated its 2025 target for adj. EBITDA of between $900m-$1bn and finally answered the question of what it would do with its excess cash by announcing a $1bn share buyback

• Recall, just this week DraftKings pulled the plug on its NFTs experiment, shuttering its Reignmakers and Marketplace offerings after running into legal troubles.

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Tit for tat: Horse racing content from Churchill Downs’ TwinSpires and the New York Racing Association was pulled from their respective platforms due to a contract dispute.

Inspired Entertainment and BetMGM have launched hybrid live-dealer game MGM Bonus City in Michigan.

Gaming REIT VICI said on its Q2 earnings call it has opted not to exercise its call option to buy the real estate of Caesars’ two properties in Indianapolis saying it will use cash on other growth initiatives to diversify its asset and tenant base.

Micro-betting provider Kero Gaming has announced a content distribution deal with Bragg Gaming. 

By the numbers

UK: Q2 online GGY rose 12% YoY to £1.46bn driven by a 16% increase in online betting, according to the latest data from the UK Gambling Commission. Slots GGY increased 10% to £642m. 

• Retail GGY was down 1% in the three months to June to £582m with machine GGY down 1% to £290m and OTC betting down 7% to £168m. SSBT GGY was up 5% to £37m.

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M&A fever pitch

Gee up: The value of betting and gaming M&A deals announced in the past 10 days now totals over $11.4bn after Caesars announced the sale of the World Series of Poker brand for $500m to NSUS, the owner of GGPoker. 

The deal is the latest in a slew of acquisitions announced in the past 10 days. They include Apollo’s $6.3bn buyout of the IGT/Everi combination and Standard General’s $18.25 offer for the Bally’s shares it doesn't already own, which valued the entity at $4.6bn.

• Also yesterday Betsson announced it had bought the pricing and trading business Sporting Solutions from FDJ for an undisclosed sum to enhance both its B2C and B2B propositions.

• Last week, Stakelogic sold up to Sega Sammy for $130m and Stake.com bought its way into the licensed Italian market with the buyout of IdealBet. 

• Meanwhile, PrizePicks has appointed Moelis to look at its “strategic options” that could include potential M&A. All this while rumblings continue over a Boyd bid for Penn.

Caesars deal talk

Cash on the table: The WSOP deal includes $250m of cash and a promissory note for the remainder due five years after closing. Analysts said the cash flow being sold likely amounted to ~$22.5m implying an EBITDA multiple of ~22x.

• Under the terms of the agreement, long-standing partner NSUS has granted Caesars the right to continue hoisting the flagship event at its Las Vegas properties for at least the next 20 years.

Right to buy-in: Caesars Digital will also receive a license from NSUS to continue operating its recently upgraded WSOP Online real-money poker business in Nevada, New Jersey, Michigan, and Pennsylvania “for the foreseeable future.” 

• Otherwise it will be restricted from operating online peer-to-peer real-money poker operations for a specified period of time and subject to certain exceptions. 

How to sell it: Caesars had signaled its waning interest in online poker on its Q2 earnings call this week when Eric Hession, precedent of digital, said “online poker does okay, but doesn't make a huge amount of money.”

• The actual event, though, continues to drive profits, suggested CEO Tom Reeg, who said this year’s event had been the “best ever.”

• “It fills a lot of rooms on the east side of the Strip,” he said. “We see benefits in table games. We see benefits in slot play.”  

Analysts weren’t surprised by the “non-core disposition” with Deutsche Bank suggesting there is “likely more to come” with proceeds earmarked for debt reduction and share repurchases.  

MGM catches an F1 flat

Slipping and sliding: Earnings call comments from MGM Resorts CEO Bill Hornbuckle suggesting this year’s edition of the Las Vegas Grand Prix might be more of a struggle for the Strip’s largest properties caused a $1.4bn fall in the value of the company as the shares fell nearly 12.5% yesterday.

• Recall, Hornbuckle said forward booking for the week of the race in November were “off to a slow start” compared to last year.

• He said MGM was “hoping and believing that this race will continue to pace up” but he said it presented a potential headwind in Q4.

Can’t fight this feeling: Analysts remained bullish despite the adverse share price reaction. “While we do not believe the F1 commentary should be the takeaway from the call, it admittedly is likely to be just that,” said the Deutsche Bank team.

• The team at CBRE said the ~$30m F1 headwind was a “rounding error” for a business, which generates ~$5bn of EBITDA annually.

Moving the goalposts: Meanwhile, the CBRE analysts also noted MGM “seemingly moved away” from its previous guidance for $500m in online EBITDA in FY26, “leaving investors uncertain about the way forward.”

🚧 Wacky races: MGM Resorts hits a share price chicane

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PointsBet

Even keel: At a normalized EBITDA level, PointsBet expects to break even for the year to June, with expected losses of A$1.8m vs a loss in FY23 of A$49m. FY24 net win rose 16% to A$267m while Q4 was up 12% to A$68.4m.

• CEO Sam Swanell said improved efficiency and productivity had been a “critical catalyst” and was driving market share gains in both Australia and Canada.

• However, while iCasino in PointsBet’s remaining North American interest in Ontario rose 63% for the year to A$18.8m, it somewhat stalled in Q4, up only 4% to A$3.8m. 

• Swanell said this was due to VIP “negative variance.”

You’ve got it all: PointsBet has completed both the distribution to shareholders of the US$225m proceeds from the sale of the US business to Fanatics following the receipt of the final US$50m from the purchaser and the complex transaction and approval process.

Lottomatica’s better bet

Getting up to speed: Not content with the near 30% share between its various brands in the Italian sports-betting and iCasino market, the management of Lottomatica promised there was more to come once the SKS acquisition is fully replatformed and the product is “at the level of the rest of the group.”

• “Then we really expect that to kick in and drive additional market share,” said CEO Guglielmo Angelozzi.

• Noting that Lottomatica was “not saying SKS is not a good product,” he said the confidence in further share gains came from knowing “it’s just we have a better one.”

Construction time again: Further acquisitions for Lottomatica are expected in the gaming franchise business where Angelozzi said there were “very attractive opportunities for consolidation.”

• “The pipeline continues to be robust and there's been an acceleration,” he added.

• But as for looking beyond Italy’s borders, Angelozzi said Lottomatica was still only in “scouting” mode.

• “We have an active pipeline where we scout and do due diligence on international assets and we will continue to do that.”

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Calendar

• Aug 2: DraftKings (call)

• Aug 5: Playstudios

• Aug 6: Genius Sports, Full House

• Aug 7: Super Group, Light & Wonder

• Aug 8: Entain, Bragg, Penn Entertainment, Golden

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