Good morning. The talk this week from BetMGM about profitability being achieved in New Jersey and Michigan was timely. But as the analysts pointed out, the omissions from the list of ‘positive contributors’ were equally significant. Not all states have been created equal; higher tax rates take their toll, as does the lack of igaming to bolster thin sports-betting margins. The first slug of data from New York is impressive - $150m over the first weekend - but the boosters should take note of what the state expects from the tax take over the next six years.

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New York revenue

One for you: The initial New York four - Caesars, DraftKings, FanDuel and BetRivers - drummed up $150m of handle in the opening weekend of mobile betting, according to Gov. Kathy Hochul’s FY23 budget document. The report stated that 650k unique player accounts were utilized and more than 17m geolocations were confirmed. This is before BetMGM joined the party earlier this week.

Nineteen for me: The budget document went on to outline the expectation that the state would collect $2.59bn in taxes between now and 2027. This includes $249m in the next three months including the initial contribution of $200m from already collected licensing fees. The projection for 2027 is a tax take of $518m.

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BREAKING NEWS: JKO has announced it won’t bid for Playtech. This follows the previous announcement that JKO, an investment vehicle put together by former Formula 1 boss Eddie Jordan and ex-Scientific Games executive Keith O’Loughlan, had been granted an extension earlier this month to finalize its bid details. 

Clear as mud: Playtech said this morning its board “continues to recommend unanimously” the existing Aristocrat offer but it remains in the dark over the views of some “material investors” who have yet to engage “meaningfully” about their view of the offer. 

“The absence of customary levels of engagement means that the board is approaching the Court and General Meetings without a clear understanding of whether these shareholders are supportive of the Aristocrat Offer,” Playtech said.

BREAKING NEWS 2: Lottery operator Allwyn, formerly Sazka, is to seek a listing in New York via a merger with Cohn Robbins Holdings Corp SPAC. The deal will value Allwyn at ~$9.3bn. CRHC will contribute $50m of a total PIPE investment of $350m. Allwyn operates lotteries in Austria, the Czech Republic, Greece, Cyprus and Italy and is bidding for the UK National Lottery. It is forecasting revenues of ~$1.7bn in 2022 and adj. EBITDA of approximately $810m.

Entain/BetMGM analyst reaction

In the picture: Looking at yesterday’s update from Entain, the analysts at JP Morgan pointed to the commentary on M&A, suggesting “the group stays on our M&A radar”. Notably, CEO Jette Nygaard-Andersen refused to comment on the rumors from late last year of a bid for Baltic-facing Olympic Entertainment.

“With Flutter looking to acquire Sisal, an acceleration of Entain’s M&A strategy to consolidate its market share on the competitive landscape, will not be a surprise,” the JP Morgan team added.

Head for heights: On the call, CFO Rob Wood suggested Entain had the capability to raise its debt to EBITDA ratio to up to 3x, and potentially beyond that if the right deal came along. JP Morgan did a back-of-the-envelope calculation and suggested the headroom available equated to around £450m.

Route one: Deutsche Bank suggested Entain’s remained an “attractive way” to play both industry consolidation and the growth opportunity in the U.S. On the latter, Morgan Stanley analysts said BetMGM continues to have “impressive market share”. But they cautioned over the sustainability of that market share as more igaming competition enters the field.

PlayUp/FTX investment

Back in the game: PlayUp has announced that FTX made a $35m strategic investment in the company. It is understood this investment predates the blowup between the company and its ex-U.S. CEO Laila Mintas that occurred after FTX had made a $450m bid for the entire business.

Up in the air: Kevin Smith, CMO and PlayUp spokesperson, said the company remained in “ongoing discussions in terms of future investment and involvement”. “The percentage of equity FTX will get will be determined at a future date when their investment is converted into actual shares,” he added. 

Academical: The company also announced further management moves with Art Hamilton being appointed USA CFO to assist Dennis Drazin in his new role as chairman. The company said he previously worked with PlayUp shareholder Matt Davey, now principal at Tekkorp Capital.

For more on FTX’s investment plans see sector watch below.

Walk the line: We’re hugely grateful for the mentions given to this newsletter by the team at EKG. To return the favor, we point our subscribers in the direction of their EKG line, available every fortnight.

NeoGames/Aspire reaction

Change of address: Looking at Monday’s deal, the Truist team suggested the move extends NeoGames’ addressable market both in terms of product and geographically. It suggested the pro forma revenues for the combination in the first nine months of 2021 were ~€220m in revenues and ~€53m of EBITDA. 

“While there are certainly opportunities to grow Aspire’s services with commercial operators, we think the deal is more about servicing lotteries (likely more internationally- based) increasingly looking to sports betting and iGaming,” said Truist.

Hi honey, I’m home: Management was keen to stress on the call that despite the common shareholders (and founder) and NeoGames’ previous status as a subsidiary of Aspire Global, the decision to press ahead with the acquisition was made by a committee of independent directors. Analyst at RedEye noted the SEK111 per share offer was higher than its base case of SEK90.       

Better Collective analyst update

Better days: Analysts at Redeye see EBITDA for Better Collective rising to €106m in 2023 off the back of the group’s “substantial” increase of U.S. revenue mix. The U.S. will make up 38% of Better Collective’s overall revenue in 2022 vs. 26% in 2021, said Redeye. EBITDA from the U.S. is expected to hit €47m in FY21 and Redeye forecast €93m of U.S. EBITDA in FY22.

Breaking news: Better Collective has announced a commercial partnership with the New York Post. Recall, media partnerships brought in 40k of Better Collective’s total 200k NDCs in Q4. Financial terms were not disclosed.

SciPlay analyst update

Action time vision: In light of the Microsoft/Activision blockbuster this week, analysts at Truist have issued a timely note on the casual gaming sector and suggest the surprise withdrawal of Scientific Games from its intended buyout of the 19% of SciPlay it didn’t already own had made the risk-reward equation “ more favorable’.

Party piece: The team also suggested a recent unexplained “discrete” blip with SciPlay’s Jackpot Party Casino games is past. Note, the JPC app is worth 51% of Sciplay’s mobile bookings, followed by Quick Hit Slots with 15% and Goldfish Casino with another 15% each “looking healthy” according to Truist.

Sector watch - retail financial trading

Blurred lines: A recent article in the Financial Times linked the boom in U.S. sports-betting with the broader spread of speculative activity including NFTs, cryptocurrencies and meme stocks. “Americans are being offered more ways than ever to roll the dice on their financial futures,” the article suggested. That blurring has been encouraged by “gamified” trading apps such as Robinhood.

Wtf…TX: The implicit link between the new-gen trading companies and gambling has become explicit - see the news above on FTX’s investment in PlayUp. Investment is clearly the plan for FTX which recently launched a $2bn venture fund run by former Lightspeed Venture Partners alumna Amy Wu.

Despicable meme: Alongside an array of crypto opportunities, that fund will look at “crypto-fueled and NFT-powered gaming” where it will no doubt bump up against the activities of meme stock fave rave GameStop. It announced in early January it would be launching an NFT marketplace. 

Gammon stop: One year on from the meme stock frenzy, the UK’s Interactive Investor released figures showing the extent of the generation gap opened up by the whole phenomenon. GameStop was the sixth most traded stock for the 35-44 age group but didn’t even make the top 10 for any age group above 44.

“The key takeaway from the saga is treating investing like a spin at a roulette wheel by betting on highly speculative stocks is not a sustainable strategy to build wealth over the long-term,” said Interactive Investor’s personal finance campaigner Myron Jobson.

Further reading: Trading is gambling and financial fatalism fuels a gambling gold rush.

Flywheel watch

It’s back! Serial offender Jette Nygaard-Andersen gave the dreaded phrase another runout on Thursday. Meanwhile, the analysts at Credit Suisse also fell into the trap in its initiation coverage of Genius Sports. If we’ve told you once…

Datalines 

Pennsylvania Dec21
Sharehold: Sports-betting handle was up 36.8% YoY to $750.4m with mobile accounting for $693.3m (+29.5% YoY). GGR dropped 55% MoM to $38m and -16.3% YoY ($18.8m net of promotions) with hold down 320bps YoY to 5.1%. Online casino GGR was up 42.6% to $102.1m. DraftKings (29.5%) and FanDuel (35.6%) maintained ~65% of mobile handle, said Deutsche Bank. BetMGM was third (12.1%) and Barstool fourth (8.9%). 

Promo deals: Wells Fargo said FanDuel’s OSB share of GGR came in at $14m, with promotions at $6.1m resulting in NGR of $7.9m. Its icasino GGR was $18.5m. DraftKings’ OSB share of GGR was $8.2m, with promotions at $3.6m resulting in NGR of $4.6m and icasino GGR at $16.2m.

Louisiana Dec21: GGR was up 32.8% YoY and 2.2% vs. Dec19 to £215m. On a quarterly basis, casino GGR was 27.9% YoY and -0.8% vs. Q419. Penn National properties recorded GGR of $86m, up 41.7% YoY and 25.8% vs. 2019. Boyd Gaming’s GGR rose 22.6% YoY but was down 7.7% vs. 2019  to $36.9m, Caesars’ GGR was up 21.1% YoY but down 26.9% vs. 2019 to $37m. In-person stakes totaled $39.5m and net revenues of $4.4m.

New Hampshire Dec21: Sports betting handle was up 67.4% to $86.4m but GGR was 42.2% YoY and -58% MoM to $2.6m. DraftKings recorded $65.6m of the handle, with $20.9m wagered at the three retail outlets in operates in the state. 

Newslines 

Dynamo hum: FuboTV is the new jersey sponsor of the MLS team Houston Dynamo. The group signed a multi-year market access deal with the club to launch Fubo Sportsbook in Texas pending regulation of sports betting in the state.

Musical chairs: Marco Sala, CEO of IGT, is leaving his role to take up the position of executive chairman of the group. He replaces Lorenzo Pellicioli, who is retiring and will remain as a director of IGT. Sala was also named as the new CEO of IGT shareholder De Agostini. Vincent Sadusky, ex-CEO of Hispanic TV network Univision, will be the new IGT CEO. 

P2P debut: Peer-to-peer betting exchange Wagr has gone live in Tennessee as the first U.S. platform to operate P2P betting. Wagr recently announced that it had closed a $12m Series A round. Investors included the Kraft Group, owners of the New England Patriots and New England Revolution, Harris Blitzer Sports & Entertainment, owners of the Philadelphia 76ers and New Jersey Devils; and VC firms including BITKRAFT Ventures, Greycroft, Pear VC and Seven Seven Six.

On social:

O' @nextyearknicks

@WagersUSA @withwagr they should advertise as letting enemies bet against each other - cuz friends aren’t going to just give up 5% when they could bet each other off the app with a 0% fee

January 20th 2022

5 Likes

Cashless wonder: Nevada casino-goers will be able to sign up remotely for cashless gaming and payment accounts following approval from the Nevada Gaming Commission yesterday. The approval covers only casino gaming and doesn’t include sports betting and horse racing accounts. 

What we’re reading

Red alert: Spot-betting in the spotlight.

Great open skies: Last-minute lobbying

Not taking it in their stride: Major issues with Rank’s in-house platform

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Calendar

• Jan 24: Endeavor @Jefferies Winter Summit

• Jan 26: Las Vegas Sands Q4

• Jan 27: Rank H1, Genius Sports investor day

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• Scott Longley scott@clearconcisemedia.com

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