Good morning and welcome to the latest newsletter which includes:

• Sector share prices suffer a punishing week on the exchanges.

• Allwyn seeks SPAC merger.

• Playtech’s takeover resolution depends on former CEO.

• Startup focus looks at free-to-play games provider Chalkline.

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The shares week

A sea of red: Jeremy Grantham, the co-founder of Boston-based fund management firm GMO in Boston, said back in 2007 that equity markets are slow to recognize when the investment backdrop has significantly altered. 

“Although the brontosaurus has been bitten on the tail, the message has not yet reached its tiny brain, but is proceeding up the long backbone, one vertebra at a time,” he said of the still buoyant equity markets on the precipice of the Great Financial Crisis in 2008.

Bubblenomics: John Authers, columnist at Bloomberg, said he was reminded of this comment at the end of last week after a punishing couple of days on the financial markets. The Nasdaq was down over 6% on the week while the S&P500 was also down over 5%. Such is the context for the losses being sustained in the share prices across the global betting and gaming sector in the past week.

• DraftKings, down 19.5%

• Caesars Entertainment, down 14.6%

• Penn National Gaming, down 11%

• MGM Resorts, down 9%

Secular event: A wider question is to what extent the sell-off is discriminating either between sectors or within them. The talk from the gaming analysts centers on worries over the profitability of sports betting, an aspect that the success of mobile betting in New York appears to have done nothing to counter. Indeed, the fear is that New York only exacerbates the profitability issue.

On yer bike: H/T to Chris Lynch on Twitter for pointing to the similarities between the performance of the share prices of DraftKings and Peloton in the last year.

Source: Google Finance

Further reading: The end of the pandemic stock boom.

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WynnBet sale?

Weekend rumor: Wynn Resorts is looking to sell off its online betting and gaming business, according to a story this weekend in the NY Post. The report suggests the company has “slashed” the asking price to $500m compared to the $3bn valuation when it planned to merge the business with the Austerlitz SPAC. Those plans were scrapped at the time of the Q3 results when outgoing CEO Matt Maddox said the sports-betting market was “not sustainable right now”.

On social:

Chris Grove @OPReport

Makes sense - the spin-off window ended up being shorter than it seemed like it might and there’s not a great reason for them to nurse a low-single-digit digital arm in saturated state markets where they don’t (and are unlikely to) have a retail presence.

Market Rebellion @MarketRebels

$WYNN reportedly looking to sell its online sports betting business for $500 million

January 24th 2022

3 Retweets6 Likes

Playtech takeover doubts

Hong Kong Tom: Former Playtech CEO Tom Hall has emerged as a key player in the betting and gaming supplier’s takeover psychodrama. According to reports over the weekend, Hall, who owns a small sub-2% stake in Playtech, is “acting as the conduit” for a group of Asian investors unhappy with the valuation of the Aristocrat bid.

Block vote: As covered previously by WE+M, these include Paul Suen, the owner of English second-tier soccer side Birmingham City FC and Las Ambassadeurs casino in London, Karen Lo, the billionaire heiress, and Stanley Choi, a professional poker player. A Hong Kong-based fintech investor TT Bond Partners is also a shareholder. It is believed that together the Asian investors control ~28% of Playtech and thus have enough to vote down the deal as proposed. 

It’s good to talk: Playtech said on Friday it was continuing to “seek engagement” with its shareholders including those that had “taken material positions” post-the Aristocrat offer. It leaves Playtech flying blind as it moves towards a crucial vote on Feb 2.

Underwater: All this follows the news that JKO, the bidder led by F1’s Eddie Jordan, had pulled out of the race on Friday. In the midst of the market rout on Friday, Playtech fell nearly 14% on the news. It is now trading at ~630p, below Aristocrat’s 680p-a-share offer.

Hall of fame: Hall is currently chief executive of Sporting News, a publishing business that his investment company Pax Holdings bought from DAZN in late 2020. He was previously the non-exec chairman at Asianlogic, the company behind the Asian-facing Dafabet. 

New York mobile sports-betting

Fourplay: New York took in $603m in online handle in the first nine full days of operation, generating $48.2m in revenue and taxes of $24.6m. The handle was driven by four licensees - Caesars, DraftKings, FanDuel and BetRivers. BetMGM has also since gone live and PointsBet is expected launch in the coming weeks. Bally Bet, WynnBet and Resort World Bet are still to announce their plans.

“While these weekly numbers are undeniably impressive and imply NY will likely ramp to the highest handle/GGR state by next month, we also are realistic that this week one performance reflects a significant contribution from promotional activity and also the busy sports schedule (NFL playoffs, NBA in full swing, etc.),” said the Wells Fargo analysts.

Up the Swanee: Notable from the early figures is the apparent failure of Rush Street Interactive’s BetRivers brand to grab anything in terms of first-mover advantage with just 1% of GGR. In a happier place will be Caesars with its early 47% share with FanDuel (29%) and DraftKings (23%) behind.

Search party: The early market share trend confirms the data from Google search interest in New York. Previously FanDuel and Caesars topped the NYC Google search charts, but Caesars' aggressive advertising looks to be paying off in terms of brand awareness and resulting search performance.

Crashlanding: The success came at a cost, however, with the app struggling to handle the volumes being generated. Over the weekend, the group issued a statement to ESPN apologizing for the problems.

Caesars said New York operates “on an unprecedented scale” which had “exposed issues in our platform and we've made numerous updates every day since launch to improve the customer experience”.

Allwyn float

Stand and deliver: Allwyn CEO Robert Chvatal said the lottery group, formerly known as Sazka, would see “digitization and increasing online sales” drive future growth. The group, which confirmed the details of the $9.3bn merger with the Cohn Robbins Holdings Corp. SPAC late last week, suggested jurisdictions in Europe and North America “should have higher expectations for the innovations their lotteries can deliver”. 

Entain analyst update

Deal flow: Entain’s strategy of pursuing further M&A received support from the analysts at CBRE late last week, after the company mentioned it had headroom for more deals.

"Although Entain’s balance sheet and cash flow could support a moderate capital return policy while still providing ample flexibility to pursue growth, we believe the ROI and growth initiatives are more compelling," the CBRE team wrote.

Startup Focus - Chalkline

Who, what, where, when: Founded in May 2016 by Daniel Kustelski, CEO, Joe Kustelski, CTO, and Jason Foster, the Nashville-based Chalkline operates the BettorGames free-to-play games platform which offers operators a range of customer acquisition and player retention options. Prior to founding Chalkline, Dan Kustelski and Foster also founded a sportsbook which they sold to Sun International.

Funding backgrounder: In Mar21, Chalkline closed a $2.7m financing round led by Parlay Capital Holdings and Patrick Conroy. As part of the financing round, Greg Buonocore from Parlay and Conroy joined the board. Other investors include gaming industry veterans Afshin Yazdian, Andrew Braitchouk from Sports Media Interactive, and Clay Travis of Fox Bet Live and Outkick.

So what's new? In the past six months, Chalkline has signed a number of new clients, doubled the size of the development team and rolled out further personalization tools. The goal for 2022 is to deliver more actionable player data to its clients including predictive AI tools, adtech and customer data platforms (CDPs). More client news is imminent.

The longer pitch: “Thirty million Americans are yet to place their first legal sports bet,” says CEO Kustelski, adding the free-to-play games are a perfect tool for educating new players while connecting them closer to their favorite teams and sports. “Flexible free-play games consistently deliver improved marketing ROI across owned, earned and paid programs for both acquisition and retention,” he suggests. He adds that “looking at our past three years of record numbers” take-up by U.S. players for free-to-play games has been impressive.

Rush Sports launch update 

Pilot program: In-game betting startup Rush Sports went live at the weekend with its Picknextplay.com live betting game. The free-play pilot launch centered on the Buffalo Bills-Kansas City game and was done in partnership with Canadian casino brand North Star Gaming and sports and betting content startup Parleh Media. CEO Tomash Devenishek told WE+M that he hoped “this small pilot would enable (his company) to continue growing and capturing value in this very lucrative and thriving category”.

NFL viewing

The best view: Following last week’s news that the NFL’s regular-season games had recorded their best audience since 2015 comes the latest data from Nielsen for the Super Wild Card Weekend which showed a 30.5m average. This was a 21% rise on 2020 and is the second-highest Wild Card Weekend average since 2015-16. The 34bn total minutes of consumption for the games across all platforms was up 17% up on 2020 and was the highest total on record.

The week ahead 

On Monday Endeavor will be taking part in a fireside chat hosted by Jefferies. Also lined up for slots this week are MGM, Scientific Games and Golden Entertainment. Wednesday sees Las Vegas Sands report its Q4s. Q3 revenues rose 92% despite the lack of visibility on the return of the Asian business. Clarity will also be sought on its online M&A plans. On Thursday Genius Sports hosts an investor call; in Q3 it upped its revenue guidance for the year to $53.7m. Also on Thursday, Rank will report its H1s which are likely to show continued Covid disruption. Later on, PointsBet will report Q4 numbers.

Newslines

King’s ransom: Kings Entertainment Group Inc, the company behind the LottoKings and WinTrillions sites, is to begin trading on the Canadian Securities Exchange tomorrow, 24 Jan. The company said the listing will help it branch out into live casino and sports-betting. It says it has a “strong foundation” in the LatAm region.

On the troon: PointsBet has been announced as the official and exclusive sports-betting partner of Arizona-based luxury golf and club hospitality service provider Troon. Troon has more than 630 locations around the globe and locations in more than 45 states. 

Raiding party: Internet Vikings has launched a social casino operation in conjunction with two operators in the Illinois market ahead of any igaming legislation.

Mellow gold: Affinity Interactive and Golden Nugget Online Gaming have signed a multi-year agreement that will provide GNOG with access to the Missouri online gaming and betting market when it opens. A number of bills are working their way through the Missouri legislature in the next six months. Kambi and Affinity recently announced a partnership that will see Kambi provide the technology behind Affinity’s online and retail sportsbook DRF Sports in Iowa, Missouri and Nevada.

What we’re reading

Nanny goat: the new UK Tote is a winner.

What we’re writing

On wagers.com: The rise of the middleweights.

On social

How was your weekend?

Patrick Everson @PatrickE_Vegas

Per @BetMGM's Scott Shelton (@scottatmirage), in a text on today's #NFLPlayoffs double-whammy of 'dog outright and Under: "I don't recall a better day ... ever. The double-dog moneyline wiped out all parlays/teasers. Everyone will be starting from scratch tomorrow."

January 23rd 2022

11 Retweets44 Likes

Calendar

• Jan 24: Endeavor @Jefferies Winter Summit

• Jan 26: Las Vegas Sands Q4

• Jan 27: Rank H1, Genius Sports investor day

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com