Shall we vote? Hedgies harry Entain, badger Bragg

Entain and Bragg activist calls, affiliate M&A, ESPN Bet data, Product+More – Kambi’s Tzeract +More

Earnings+More

Nov 24, 2023

Activist pressure builds on Entain; Bragg faces calls for sale
Oddschecker snaps up Catena’s Italian-facing SuperScommesse.
ESPN Bet enjoys a record week in downloads.
New feature Product+More looks at Kambi’s AI-driven Tzeract.
BettingJobs’ Jobsboard features marketing, branding and general manager roles.

Can't we give ourselves one more chance?

Entain activists

Two more hedge funds build positions in Entain.

Coup d’état: Two activist investors with stakes in the under-pressure operator have reportedly expressed concerns about the performance of the current management team and the company’s strategic direction.

The news follows the criticism of Entain expressed in the summer by activist investor Eminence Capital, which decried its M&A strategy following the news of the €750m acquisition of Polish operator STS.
Eminence said at the time it was “outraged” by the deal, saying it was “perplexing on many levels”.
Sources have told E+M that Entain has subsequently sworn off further bolt-on acquisitions in the wake of the accusations.

Heads will roll: According to the FT, New York-based hedge funds Sachem Head Capital Management and Dendur Capital established stakes in the company in 2021. The paper said the investors have met regularly with executives from Entain in recent months.

It added that the position of CEO Jette Nygaard-Andersen is under particular scrutiny.
The FT reported a source familiar with the thinking of the hedge funds as saying the shareholders had “lost faith” in her stewardship and would be seeking her removal.
Entain said in a statement it was “committed to constructively addressing any questions or concerns” of shareholders and had “a clear plan” to expand the business organically.

The news of further activist involvement caused the share price to rise nearly 6% on Wednesday.

😠= ⚡ Activist investor news encourages share price bump on Wednesday

And Bragg too

Bragging rights: A significant shareholder in Bragg Gaming has issued an open letter calling on the management to consider a full or partial sale of its assets in order to maximize shareholder value.

The letter from Raper Capital noted that, since the acquisition of Oryx five years ago, the company has grown revenues by almost 4x to €97m.
Yet, “despite this impressive performance”, the share price is 25% lower now than it was at the time of the deal.
Irony: However, the news caused the shares to spike – by 23%.

I state my case, of which I’m certain: With a public market listing failing to rectify the “chronic underperformance”, Raper said a sale to a third-party is the “only way to crystallize a proper return”. There is, the letter stated, “no reason to persist in purgatorial futility as a listed company”.

Now or never: The letter added that there is an “irrefutable economic logic” to pursuing a sale, including the benefits to be had from stripping out the “excessive compensation” of the directors. Raper said the time to do a deal is now, due to the “conducive M&A environment” and against the backdrop of “the inescapable cost of capital realities” for Bragg.

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+More

Evolution has announced a €400m buyback via the purchase of nearly 20 million shares.

Seven and seven is: Fanatics has launched OSB operations in Virginia, its seventh state so far, while bet365 has launched in Louisiana, which happens to be its seventh state.

By the numbers

Michigan: The October data shows a 10% YoY decline to $46.1m on handle that rose 9% to $551m. iCasino GGR was up 14% to $160m. In iCasino, BetMGM maintained its lead with 28% but DraftKings (24%) and FanDuel (23%) were close behind.

Since January, BetMGM is down 6 ppts from over 34%, FanDuel is up over 4 ppts from 19% and DraftKings is up over 2 ppts from 22%.
In sports betting, FanDuel continued its domination of AGR with 54%, ahead of DraftKings (35%) and BetMGM (18%).

ICYMI

In LosIngresso+Mas, the Brazilian sports-betting bill passed a key committee – with a lowered tax rate.

On social

Y’all ain’t real: Durant rants.

Affiliate M&A

Bandwagonesque: The ~~fire~~ sale of Catena Media’s European and elsewhere gaming affiliate assets was brought to a conclusion this week as Oddschecker snapped up the SuperScommesse operation while another unnamed party picked up the remaining Italian-facing assets.

The total paid for both was €19.8m, bringing the amount raised through the divestments to €76m. The money will go towards paying down Catena’s debt.
Catena said the Italian sale concluded its strategic review that was launched 18 months ago.

La dolce vita: Oddschecker said the acquisition would bolster the company’s positioning in Europe’s second-largest betting market. It already has media partnerships in the country with La Gazzetta dello Sport and DAZN.

The company noted that, despite the marketing restrictions around gambling in Italy, the law allows for odds comparison sites.

Compare and contrast

You did ask: The news of the SuperScommesse sale came on the same day as Catena’s Q3 earnings (see below). On the call with analysts, CEO Michael Daly was quizzed about the post-acquisition success GiG is having with another ex-Catena business, AskGamblers, which it bought in December last year for €45m.

He suggested Catena had cut its losses with AskGamblers due to its exposure to unregulated markets.
“We were continually being sent letters,” he added, asking for services into gray and black markets to be switched off.
Others, he went on to say, had “different views” on whether unregulated markets were “stable enough for their businesses”.

The other side of the story: However, the next day GiG’s director of SEO and publishing, Milorad Matejic, went on LinkedIn to say the business had “grown traffic exponentially” due to GiG’s efforts.

👀 “We have seen growth globally, but most significantly in regulated markets, such as the UK,” he added.

Catena slides

Giving up ground: Investors didn’t like what they heard from gaming affiliate provider Catena Media one little bit on Tuesday as they sent the shares reeling, down 21% on the day and giving up all its gains from earlier in the year.

The company claimed – not all that convincingly – that the 28% decrease in revenues to €15.9m was due to the “short-term impact” of a move away from CPA deals to a revenue-share structure. Worse, in October revenues fell by 37%.

Analysts noted on the call that Q3 new depositing customer numbers fell by more than revenues, off 34% YoY.
CEO Michael Daly blamed media partnerships elsewhere in the sector for the fall in numbers through the door.
Adj. EBITDA collapsed YoY by 65% to €3.1m.

I see a bad moon rising: Daly said the asset sales and the focusing of the business on North America meant it could “weather the storm” of the revenue-share transition. Still, he noted the lack of state launches in H124, with only North Carolina and Vermont likely to open. “Much is possible,” he added.

Earnings in brief

OPAP: Revenue rose 7.8% to €481m, with both retail and online betting and gaming contributing; however, EBITDA fell 26% to €145m due to inflationary pressures on the cost base. Within the online business, the iLottery offering recorded double-digit growth.

Cirsa: Q3 revenues were up 9% to €493m while EBITDA rose 7% to €158m. The company said online operations revenues rose 22%, worth 17% of total revenues, helped by the boost from E-Play24 acquired in Q322. In Spain, Cirsa said it remains a leader in the slot market, with revenues increasing 8%

Golden Matrix: The company estimated FY23 revenues will rise 22% to over $44m, helped by record Q4 revenues of $11.7m. The gains were due to the UK-based B2C operations, specifically the R Kings Competitions business. There was no more news on the planned Meridianbet acquisition.

Esports Entertainment: Following the recent restructuring and sale of the Bethard business, revenue for the first fiscal quarter decreased 72% YoY to €2.7m.

Download data

Ratings winner: Penn Entertainment’s ESPN Bet hit 1.1m downloads since launch, in data that runs to the start of this week, the most downloads over a multi-day period, according to the analysts at JMP. They noted the next highest six-day total was FanDuel during Super Bowl 2022, at 468k.

In week 11 of the football season, ESPN Bet collared 70% of download share, with FanDuel on 10%, DraftKings on 8% and BetMGM on 5%.

Wot, no integration? The only negative for JMP was the lack of the promised ESPN/betting app integration. “The pitch on the partnership has been the media cross-sell, fantasy integration and live-streaming capabilities across the enterprise,” they added.

“At this point, the integrations do not appear to be evident, and with 1 million+ players migrating to the app they are now using a product fairly comparable to its peers within the industry,” the team said.
While suggesting the integrations “may take time”, the team believed true market share and retention results will only be evident after the Super Bowl as the company pulls back on spend.
“We see ESPN Bet as incremental to the size of the market and not necessarily a threat to take market share from individual operators, given the multi-book usage.”

That’s a Buy: The analysts at Bank of America were suitably impressed with the early data to raise their target on Penn to a ‘Buy’, suggesting the download share was “much stronger than anticipated”. But the team added ESPN Bet still had to prove its chops, notably around retention capability, tech and depth of markets.

Product+More – Tzeract

Putting the pieces together: During Kambi’s recent Q3 earnings call, the company unveiled its new AI-powered trading unit called Tzeract, a tool that it is soon to start offering as a standalone module within its sports backend offering.

“AI’s impact until now has been in the areas of risk management, marketing and CRM,” said David Jacquet, interim MD for the product.
But for Kambi, this is the first time the technology is being brought to bear on its core product.

Human face: Two factors are at play: player tastes are moving towards offers and products that only complex algos have the capacity to deliver, while the growth in the data being generated requires AI to interpret it and trade the products correctly. Such is the size of the datasets, moreover, it is impossible for humans to process it.

“User behavior is shifting towards end-user curated markets and, simply put, the traditional monolithic bet offer platform is struggling to keep pace,” said Jacquet.
He added the coming trading revolution brought about by AI will “expand the scope of product creation and how it is packaged for the user”.
In particular, he said, AI will shift the focus in sports betting towards differentiation.

Getting it out there: At the time of the Q3s, Kambi said the product was currently being tested by one customer and discussions were ongoing with a range of other operators.

Who else is talking about AI in sports betting? Who isn’t? Sportradar has been promoting its AI capabilities for a number of years, Swish Analytics has its Live AI product and Genius Sports’ Second Spectrum offshoot provides AI-powered player tracking.

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Calendar

Nov 28-29: Jefferies sports-betting and iGaming summit, New York
Nov 29: Kindred, Rivalry
Dec 4: BetMGM investor meeting
Dec 5: Allwyn

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