Activist HG Vora rattles the cage at Penn
Activists at Penn, by the numbers – Nevada, a big month for Flutter, startup focus – Sporting Risk +More
Activist investor hopes to steer Penn away from ‘value destruction’ in digital.
F1 helped generate record revenues in Las Vegas in November.
With a dual-listing imminent, it’s a big month for Flutter.
First startup of the year is B2B sports-odds offering Sporting Risk.
You gotta grow, you gotta learn by your mistakes.
Activists at Penn
Fearful of Penn squandering the ESPN Bet opportunity, HG Vora is seeking places around the boardroom table.
Get it right next time: A significant shareholder in Penn Entertainment has gone public with its plan to get board representation and hoping to avoid “fumbling the ball” with ESPN Bet after what the hedge fund believes is a history of value destruction in the online arena.
In an SEC filing late last week, hedge fund HG Vora said it now has an 18.5% economic interest including swaps in Penn.
It said it has been in discussions with the board about placing an unspecified number of “highly qualified directors” to work with the current management on “enhancing shareholder value”.
Backgrounder: HG Vora has previous when it comes to the sector; it remains a shareholder at 888 and also at PointsBet where it was recently involved in a cash-settled equity swap, which helped spark rumors of a takeover of the company.
Dead set on destruction: Sources close to HG Vora’s thinking suggested Penn is hugely undervalued, in part down to the board and management making “some very value destructive decisions with the interactive business” including the Barstool and theScore acquisitions.
Penn “continues to burn cash with interactive business and has nothing to show for it”, suggested the source.
“They bought Barstool at north of $500m and then turned around and sold it for a single dollar,” they added. “That is shocking and pretty clear value destruction.”
“But that isn’t the worst of it. Paying $2bn for theScore is proving to have destroyed even more value.”
Track record: Penn originally bought a 36% stake in Barstool for $163m before paying out a further $388m in February last year for the remainder of the company. It then sold the company back to founder Dave Portnoy for $1 in August last year. It bought theScore in Aug. 2021 for $2bn.
Definition of madness: The fear for HG Vora, suggested the source, is that while the ESPN Bet joint venture has enjoyed a reasonably successful launch with “promising” early numbers, “the billion-dollar question” is what does player retention look like in the next few months.
Given this backdrop, it is thought the hedge fund “doesn’t want the same board that made the decisions on Barstool and theScore to have the final say” on how ESPN Bet progresses.
Going to the mat: The SEC notice said HG Vora has been in contact with the board about gaining representation but has had no luck to date. The window for board nominations runs from Jan. 8 to Feb. 7 and if it doesn’t get its way it is thought HG Vora would be willing to launch a proxy fight, which would see the hedge fund canvas votes to replace the board.
Sources suggested HG Vora is unhappy about the length of tenure of key members of the board who have been in situ since the mid-1990s, including chair David Handler.
Once places on the board are secured, the thinking is HG Vora would then “take a view” on the current management team led by CEO Jay Snowden.
The board members “might be able to help the current management team fill out the interactive bench”, the source added.
🥊 Fight club: news of HG Vora’s board move gets market approval
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+More
The North Carolina State Lottery Commission said BetMGM, DraftKings, Fanatics, FanDuel, ESPN Bet, bet365 and Underdog Sports have all submitted applications to launch mobile operations in the state.
Live-dealer provider Playgon has completed a non-brokered private convertible debenture placement, raising C$4.97m ($3.75m), which in part will go towards funding its entry into new markets alongside general working capital and corporate purposes.
Esports Entertainment has conducted a 1 for 400 reverse stock split, which the company said was enacted in order to comply with listing rules. The share rose over 64% on the news.
Full House Resorts has opened its 300-room Chamonix Casino Hotel in Cripple Creek, Colorado.
On social
I guess that’s what they call it the ’bleau: Fontainebleau opening falls flat. Meanwhile, reports suggest the casino has parted company with senior vice-president of casino operations Michael Clifford.
What we’re reading
Trading desk: The Wall Street Journal spends some time with the trading team at FanDuel.
Career paths
Fall guy: Inspired Entertainment’s CFO Stewart Barker resigned last week with immediate effect, with the company still to file its Q3 earnings. Inspired previously admitted the delay was due to new auditors KPMG finding accounting errors that would mean the accounts going back to 2021 would need to be restated.
Marilyn Jentzen will take over as interim CFO while the company conducts a search for Barker’s permanent replacement.
Svenska Spel has appointed Anna Johnson as CEO. She is currently a partner and CEO in Sweden for global accounting services group Grant Thornton. In October, Patrik Hofbauer announced he would step down, officially leaving on January 31.
GAN: Seamus McGill will step down as chair while continuing as interim CEO, with board member David Goldberg assuming the chair role. David Ross has also been appointed to the board of directors with Michael Smurfit resigning. Recall, Sega Sammy reached an agreement to buy GAN for $108m in November.
Separately, GAN has launched the STN Sportsbook with Red Rock Resorts.
By the numbers – Nevada
Podium position: The Las Vegas Strip hit a November record of $821m, it’s second-best ever month behind July’s $835m, as the occasion of F1 brought a 23% YoY increase. Table games led the way with a 62% surge to $410m, with baccarat up over 200% due to demand from international VIPs, said the analysts at CBRE, but slots were down 1.3% to $411m.
Noting the rise in Strip revPAR, the analysts added that the “historically seasonally slow” November “is now poised to be one of the best months for the Strip, anchored by F1”.
Trust said “net-net, we think today’s release is a proof point for the inaugural F1 race’s success”.
Sports-betting GGR was up 9% to $41m, despite hold under 4.5% on handle down <1% at $921m.
Not all boats: Locals GGR was up 1.4% to $257m; however, downtown didn’t experience the same lift in volumes and saw a modest decline of 1.8% to $81.2m. JMP said this was due to patrons avoiding the traffic disruption caused by the race. Truist noted higher-end properties with closer proximity to the track had a more robust weekend, while mid/lower-tier and further away properties saw less uplift.
The big punt: The next event on the calendar is the Super Bowl. “We believe the impressive monthly results across the Strip, benefiting more of the high-end assets, implies Super Bowl will see results in Q1 ahead of consensus expectations,” said the team at JMP.
By the numbers – Macau
December produced the second-biggest GGR total of 2023, up 433% to $2.3bn and nearly 16% up MoM. Full-year GGR of $22.7bn or MOP180bn was at 63% of 2019 levels. Inside Asia Gaming reported that by reaching over MOP180bn it triggers the clauses under the new concessions that non-gaming investments increase to 20%.
A big month for – Flutter
New Year, new you: New Year resolutions don’t get bigger than Flutter’s this year, as on Jan. 29 it completes the formalities to establish its new status as a dual-listed entity in London and New York. Before that, the owner of FanDuel will kick off earnings season on Jan. 18.
In a note released pre-Holidays, the team at Peel Hunt noted the company’s shares had backtracked somewhat since the move was announced in Feb last year.
Though they regained some ground in the last few weeks of 2023 to end the year up 23%, they were down 16% on their intra-year high in late May of £16.75.
🇬🇧➡️🇺🇸 On the move: the Flutter share price in 2023
Getting to know you: The analysts believe US investors will be sufficiently familiar with the company to likely generate increased demand. “The shares offer them exposure to a fast-growing US brand with a cash cow international business,” the team added.
Moreover, Flutter will be tapping into a US investor base, which is “well used” to paying up for tech-platform businesses.
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Startup funding news
Pro League Network said it is “closing in” on a $1m funding round, which it hopes will enable the minority sports content provider with the cash to “execute its 2024 vision”. Pro League Network is behind such leagues as the World Putting League and SlapFight Championship and late last year opened its first branded PLN Studios in Branson, Missouri.
Pro League Network will be the subject of an Inside The Raise feature in the first Startup Month edition of the year next Tuesday.
Startup focus – Sporting Risk
Risky business: Born in 2021 out of an ambition to leverage the advanced data analytics of a betting syndicate via a B2B offering, the London-based Sporting Risk is headed by predictive modeling pioneer Henry Newman, working alongside co-founder Rory Campbell and CCO Andy Phillips.
Funding backgrounder: To date the business has been bootstrapped by the founders with input from some outside angel investors.
The pitch: Phillips says the premise behind Sporting Risk is that sports fans are “rapidly switching” their betting behavior towards backing individual players over teams, forcing sportsbooks to evolve their offering to make the player component a “core building block of the product and then make all betting options combinable from there”.
“At the same time, they need to help customers understand the excitement and relevance of the product in the context of the current moment in-play,” he adds.
Phillips says the bottom-up player-based modeling deployed by Sporting Risk allows for a “unique yet complementary product portfolio”, principally at present in European soccer.
This includes a deep range of player-based and team stats markets, combinable via proprietor bet-builder algorithms and all with the UX enhanced by stats-driven insights to inform customers of what is relevant and exciting at that moment, and why.
Scaling up: Phillips says Sporting Risk has signed up three customers in the seven months since launch, including deals with Dafabet and Retabet, with more client names to be added in Q1, adding that the response to date has been “highly encouraging”.
Long-term plan: Further out, Phillips says the hope beyond revenue growth driven by continuous product innovation is to potentially explore potential strategic alliances or acquisitions. He adds the company is focused on continuous product innovation.
Growth company news
WagerWire has announced its collaboration with RealTime Fantasy Sports (RT Sports) to launch a revolutionary real money trading marketplace for fantasy contests.
HappyHour.io has appointed Patrick Soric as an investment and portfolio partner. Patrick’s background is in the banking industry.
Sports-betting product developer The Unit has announced its latest innovative partnership to develop F2P games via an ongoing social media sponsorship agreement with Ohio Valley Wrestling, the professional wrestling promotion, which is currently the subject of the Netflix docuseries Wrestlers.
Alternative sports data and analytics outfit ALT Sports Data has announced a partnership with the Bare Knuckle Fighting Championship (BKFC).
Tallysight has teamed up with soccerbetusa.io to deliver content, tools and real-time odds to enhance the US soccer fan experience.
Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.
Calendar
Jan 18: Flutter trading statement
Feb 6-8: ICE London
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