The Pandemic Proof Industry Wall Street Can't Ignore
NEW YORK: Welcome to the global sports betting industry, where merger mania is creating resilient gaming powerhouses.
Mentioned in today's commentary includes Eldorado Resorts, Inc. (NASDAQ ERI), Caesars Entertainment Corporation (NASDAQ CZR), Flutter Entertainment PLC (OTCPK PDYPY), Penn National Gaming, Inc. (NASDAQ PENN), MGM Resorts International (NYSE MGM).
The first phase of the growing online gaming and sports betting industry was all about getting the tech right. The second phase is about bringing it all together. A pioneer early entrant leader in sports betting technology is hitting Phase II hard, with major acquisitions.
FansUnite Entertainment Inc. (FANS) (FUNFF) launched on the Canadian Securities Exchange on May 5, just two months after scooping up UK-based McBookie--a profitable white-label sportsbook that has seen $350 million (CAD) in betting volume since inception, and now it's hungry for more M&A.
Now, FansUnite's latest merger announcement with Canadian esports darling Askott Entertainment will give it new B2C betting platforms and over 300,000 registered members as a combined entity.
The company has been building an international infrastructure behind the scenes that looks to seamlessly connect the world's leading gaming platforms through new, cutting-edge technology.
Here are 5 reasons why you should keep an eye on the budding online gaming industry
#1 Gilt-Edged Mergers
Global betting and gaming leader William Hill a British bookmaker--has been snapping up key American sportsbook assets left and right, including Nevada bookmaker CG Technology in November.
Flutter Entertainment (PDYPY)--another dominant British bookmaker--just completed a $12.2-billion takeover of The Stars Group, creating the world's largest online gaming company and huge market share in the US, UK and Australia.
The Stars Group scooped up by Flutter, has been on its own M&A trajectory since 2014, when it acquired the parent company of PokerStars and Full Tilt Poker, followed by its acquisition of UK-focused Sky Betting & Gaming in 2018 as well as Australian online sports betting business BetEasy in December 2019.
After Flutter, Eldorado Resorts (ERI) announced its own mega-merger with industry giant Caesar's Entertainment (CZR). Just two weeks ago, Caesar's announced that it will be accepting Eldorado's massive $18 billion offer, receiving the go ahead from the Federal Trade Commission just a few days later. We are delighted to announce the FTC's approval of our planned Merger with Caesars, which is expected to create the largest owner and operator of U.S. gaming assets, noted Eldorado CEO Tom Reeg.
And right in the thick of the COVID pandemic, giant DraftKings is merging with Diamond Eagle, a special purpose acquisition company, as well as SBTech, a back-end technology provider. DraftKings' stock has nearly tripled since the merger, taking its valuation to $12.7B less than two months since the event.
The M&A strategy is a tried-and-proven model in this industry. And FansUnite (FANS) (FUNFF) is right on the merger money with its own acquisition fast-track.
In March, the company acquired UK-based McBookie, a white-label sportsbook that offers sports, casino and virtual games wagers to its approximately 10,000 active members. McBookie has garnered over $100 (USD) million in betting volume through its system over the past three years. Now, it's acquiring something much, much bigger Canadian esports giant Askott Entertainment--a key player that has been working closely with Tier 1 partners since 2013.
The deal will give the combined entity four live B2C platforms that have generated over CAD$350 million in wagers since inception and over 300,000 registered members--and counting. It will also give FansUnite four B2B contracts, with two live already and generating revenue with leading esports companies.
The deal also puts two esports-themed casino games under the FansUnite umbrella--both of which will be released this year on multiple casino games aggregators. And more games are in development, with applications already completed for B2C and B2B gaming licenses and licenses expected to receive in the next few weeks from the Malta Gaming Authority.
Askott was the first to launch a daily fantasy site dedicated to esports. It was the first esports betting brand to receive an Isle of Man back in 2017.
Now, FansUnite is growing from global esports tech leader to a much bigger offering that rounds in traditional sports and casinos for the most complete iGaming solution out there--and it's eyeing a much bigger market.
#2 This Industry Thrives, No Matter What
FansUnite (FANSCN) has a consolidation plan at prime time for an industry on a fast-track legalization push to grab a share of up to $2 trillion in betting revenues up for grabs. And this is an industry that is not only immune to this crisis but thriving on it.
As it turns out, sports betting powerhouses don't even need the NFL, NBA, NHL, and MLB. New online platforms are offering bets on just about anything you can think of--from online gaming and virtual sports to award shows and reality TV shows. Because of its fantastic flexibility, sportsbooks are still pulling in tens of millions of dollars every month. Covid-19 has done nothing to slow it.
Take Penn National Gaming (PENN), for example. The company dropped to $7.89 in mid-March but has skyrocketed back near its all-time high, sitting in the $30 range currently. That's a 280% gain in just a few short months. This jump was largely due to its timely $163 million bet on Barstool Sports which boasts an audience of younger, and more tech-savvy gamblers.
Industry veteran MGM International (MGM) has also seen a sharp uptick in its share price after bottoming out in March. While the over-100% rise in its share price can be attributed to Las Vegas' reopening, it is impossible to ignore the importance of its online sports-betting platform. While it's Vegas resorts have hit a setback with the resurgence of COVID-19, its online business has only benefitted.
#3 The Floodgates Are Open
FansUnite's merger-mania timing is spot on for another reason, too The floodgates have finally opened with the removal of various regulatory hurdles.
In 2018, the US Supreme Court delivered a landmark ruling wherein it struck down the Professional and Amateur Sports Protection Act (PASPA) of 1992. Now, nearly two years after the shackles were removed, ~75% of US states have introduced legislation to legalize sports wagering, with sports betting legal in one form or the other in 24 states.
In the U.K. where sports betting has been legal for years, nearly half of the population partakes in activity on a regular basis.
#4 Tech Is Blossoming
This industry is all about the tech, and this is where bookies become digital gods.
FansUnite (FANS) (FUNFF) will offer a broad range of match offerings, pre-match and live markets as well as live match streams. But it's a future-facing solution that targets the entire industry, offering Tier 1 players increased regulatory certainty, transparency and significant cost savings for both operators and consumers.
FANS has its own proprietary sportsbook as well as a full-service white label solution aimed at taking in other sports books through the integration of cutting-edge technologies and business growth opportunities, both launching later this year.
This unique white label tech model means that FansUnite is not tying itself to just one market, but rather is looking to quickly seize opportunities wherever and whenever they arise around the world. McBookie alone has had annual betting volume through its system of about $33M over the past three years.
FANS is still hot on the acquisition track, and based on McBookie alone, a couple more similar acquisitions and FansUnite is aiming at volumes in excess of $100M per year, probably in less than 3 years.
McBookie is based in Scotland where it now operates under a sub-license granted by the UK Gambling Commission. Its users are able to settle any betting disputes through the IBAS, a U.K.-based third-party independent arbitrator whose rulings are binding on registered operators up to the tune of GBP10,000. McBookie withdrawals take, on average, two days. After completing the acquisition of Askott, the new entity has applied for and will likely receive two gaming licenses from Malta One for the B2B arm and another for B2C.
#5 A Global Market
FansUnite (FANS) (FUNFF) is perfectly positioned to capitalize on these huge markets since it not only offers online sports betting to the UK market--one of the biggest sports betting capitals in the world-- but also because it provides technology solutions, products and services to the entire global gaming and entertainment communities.
FANS has assembled a Board of Directors and management team with decades of experience in traditional sportsbook management, casino, data, and executive responsibilities--and with the Askott acquisition, they've just doubled up on these big names, bringing their years of experience in the industry to over 100, so it's safe to say they know what they are doing. The end goal is to be the next DraftKings or Stars Group--only higher-tech.
It's a small-cap entry point with tremendous opportunity in an industry that is bursting at the seams, hotter-than-hot with M&A, defying any risk--including a pandemic--that the world can throw at it, and ready more than ever for transparency.
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