Dec 6: Chanos v DraftKings; Robins take to the airwaves
Dec 6: Chanos v DraftKings; Robins take to the airwavesRobins defend DraftKings on CNBC; PointsBet at Jefferies conference and analyst review, sports data suppliers analyst appraisal +MoreGood morning. We start today with Jason Robins’ response to comments from short-seller Jim Chanos that the economics of the company were “complete and totally insane”. PointsBet spoke at last week’s Jefferies conference about the opportunities it still sees in the US. Analysts at UBS make a comparison of EBITDA metrics at Sportradar and Genius Sports. And there are rumors surrounding the future of Churchill Downs’ TwinSpires. If you were forwarded this newsletter and would like to subscribe, click here: Robins defends DraftKingsStorm/teacup interface: DraftKings CEO Jason Robins waged a media battle with short-seller Jim Chanos via the medium of CNBC late last week. Suggesting Chanos’ financial case against the company was “insane”, he suggested “the math makes no sense” and that “some people will say anything to make a buck”.
Couch to 100k: Challenged by Brewer about whether investors were losing faith in DraftKings’ ‘jam tomorrow’ story, Robins was adamant that the story from the recent launch in Arizona provided proof of DraftKings’ success.
Going long: He added that if the CAC to LTV ratios “look great”, the DraftKings thinks that “spending more makes sense. But he added that the “consistent message” of profitability being reached in each individual state after between two and three years of operations was one that long-term shareholders appreciated.
On socialPunchbag @JasonDRobins Eh, I like the tweets. Our portfolios are bleeding, Jason could be living it up on a Saturday night instead he’s on twitter getting punched in the face & taking it. You’re a good dude. Hang in there. The week in reviewDraftKings was the most obvious victim of a bearish week for digital gaming shares as it slid 22%. As Jefferies noted, it is now down nearly 44% on the quarter. Weakness elsewhere included the continued poor run of Genius Sports, off by nearly 18% on the week and 60% down from its float price, and GAN which was down nearly 9%. Faring better this week despite the legal hoo-hah in New Jersey was Evolution which rose over 8% on Friday on the back of the news of a share buyback. Jefferies noted the sentiment ran counter to the generally positive commentary from companies at its Digital Sports-Betting and iGaming Conference held last week in New York. See PointsBet below. **Sponsor's message: Spotlight Sports Group (owned by Exponent Private Equity) is a leading technology, content and media business specializing in sports betting. Evolved from the Racing Post Group, Spotlight Sports Group has decades of experience in powering growth and conversion for the world’s biggest sportsbooks and media companies, delivering best-in-class technology and expert scalable content in more than 70 languages. From integrated solutions such as Superfeed to full turnkey publishing solutions, Spotlight Sports Group has all the tools to help customers go above and beyond the odds. For more information visit: spotlightsportsgroup.com Pointsbet@ Jefferies digital conferenceTowering inferno: Also doing some explaining around the current marketing spend in the sports-betting market was Sam Swanell, CEO at PointsBet who told an audience at Jefferies’ digital sports-betting and igaming conference in New York last week the competitive environment “reached new heights” around the start of the NFL season. “It maybe got a little bit over the top,” Swanell explained. Poseidon adventure: He added PointsBet “chose not to join in” and it had lost market share as a consequence. Recall, in Q3, PointsBet said its share in each of its seven states had fallen back and these comments would suggest it might have fallen further in Q4. Looking ahead to New York, Swanell hinted that PointsBet had some “crafty ideas” while US CEO Johnny Aitken also said there would be “more sense around promotions”. Playing keepy-uppy: While admitting PointsBet was behind the curve on igaming, Swanell suggested its strategy of focusing on in-play, with a trading team based in the US working off the tech from the Banach acquisition, would pay off given the likelihood of more sports-betting-only states. Aitken claimed on some competitors' sites one in every two in-play bets failed to complete and that this was due in part to a reliance on third-parties.
Sports data suppliers analyst appraisalThe true cost of data: A recent note from the analysts at UBS has pointed to distinct differences in the way Sportradar and Genius Sports account for their “single-largest expense”. Looking at the way each company reports adj. EBITDA, the UBS team suggests three issues arise. First, regardless of whether either company pays for the cost of data in cash or shares, it still needs to be expensed. Second, rights need to be expensed over the lifetime of the contract, not just in the first year. And third, write-downs are a real cost. Up, up and away: Using this guidance, the UBS team shows that while the Sportradar EV/EBITDA multiple comes out at between 39-44 times, with Genius the multiple balloons to over 300 times. This is due to the NFL deal that UBS calculator comes in at $720m for the six-year term, of which UBS estimates ~$350m comes in the form of share warrants. If this were spread across the six-year term, it would mean $58m of stock-based sports right expense. Applying this figure to 2023 adj. EBITDA estimates, UBS estimates the forecast number falls from $70m to just $12m. Different ball game: Turning to Sportradar, UBS says it needs to adjust its model for the cost of the recent €36m writedown of the value of NBA data under the current contract. However, unlike Genius, Sportradar already accounts for the amortization of data rights so its est. 2023 EBITDA of €143m is only reduced by the NBA impairment results. It means Sportradar’ EV/EBITDA multiple is therefore 42-47 times.
TwinSpires sale rumorTwin pique: Churchill Downs is exploring a possible sale of its betting platform TwinSpires for ~$1.5bn, according to Bloomberg. The shares rose on the story. It was not clear whether a sale would include the pari-mutuel as well as the online sports-betting business. Recall, Churchill Downs completed the rebranding of its fledgling BetAmerica business as TwinSpires in October after failing to establish much beyond an initial toehold in New Jersey and Pennsylvania. At the same time, it also moved off the SBTech platform. Earnings in briefIntralot 9m: Revenue was up 24.4% YoY to €302.8m, EBITDA rose 82.5% to €82.6m. Net debt reduced by €149.9m to €501.2m. The US business saw revenues rise 26.3% YoY. Notably, Intralot signed an agreement at the start of the month to renew its contract with Opap for an additional year from July 2023. Intralot will hold a conference call later today. Accel Entertainment Macquarie noteMinimal impact: Macquarie has upgraded Accel Entertainment to outperform due to the resilience of the group's VGTs during the pandemic. “Many consumer industries, including gaming operators, noted weakness during the Delta variant wave, but VGT data in Illinois highlighted very little impact from a location hold per day perspective,” the Macquarie team noted. Shining star: Macquarie said it had more confidence in Accel’s cash flows vs. online operators given the uncertainty around marketing spend and state launches. Within a generally healthy gaming sector, VGTs in Illinois were “the shining star”. The team noted Accel has the largest US footprint of distributed gaming and potential legalization in states like Missouri, Pennsylvania and Georgia in 2022 “should bode well for future expansion”. NewslinesOneida first: The Oneida Nation has opened the first legal retail sportsbook in Wisconsin. Based at its Ashwaubenon casino in Green Bay, the Oneida sportsbook currently is the only legal betting outlet in the state. Other tribes such as the Potawatomi and Ho-Chunk Nations are expected to soon follow suit and open sportsbooks in Madison, Milwaukee and other venues. Rocketman: PointsBet has gone live with two new advertising spots featuring former New Orleans Saints quarterback Drew Brees as part of its ‘Live Your Bet Life’ campaign. The two news sports are called “Marlin” and “Rocket” and follow the release of “Mountain” in October. They will air nationally and in regulated states and will focus on Pointsbet’s in-play offering. What we’re readingCut out and keep: a rundown on the ballot initiatives in California. Wash and go: “Non-fungible tokens (NFTs) aren’t just another new craze; they’re also a new way to launder money.” Discovery: DAZN has a rival for BT Sport. What we’re watching“This gets us into sports-betting.” Succession Ep 7: Shiv tells Logan an acquisition is Waystar Royco’s “last chance to avoid the legacy media graveyard”. On socialDonut wall of worry. Calendar
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03 Dec: Weekend Edition no.25
Friday, December 3, 2021
Jason Park fireside chat, SBC Summit North America day 2, Startup Shoutout, Macau review +More
02 Dec: AGA's Miller: Ad spend unsustainable but necessary
Thursday, December 2, 2021
Jason Robins fireside chat, SBC North America Summit day 1 recap, Nevada GGR, Scientific Games-Elk M&A, Newslines +More
29 Nov: Arrest drama in Macau
Monday, November 29, 2021
Macau arrests SunCity's Chau, Genting Q3, Q4 regional analysis, SBC Summit preview
25 Nov: Weekend Edition no.24
Friday, November 26, 2021
The WE+M Q321 Golden Alarm Clock Awards, OPAP, Rivalry Q3s, Evolution allegations response, American Affiliate/FanUnite news +More
Nov 23: Hard lines for Hard Rock
Tuesday, November 23, 2021
Florida sports-betting nixed by court, Genius Sports, Elys Technology Q3s, Deutsche Bank conference recap +More
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