The Penn put
The Penn put
Shares bounce on M&A talk, Bally’s permanent casino doubts, sector watch – esports +More
Speculation sends Penn Entertainment’s shares up 13% for the week.
In +More: LNW share buybacks, NC online lottery sales.
Bally’s permanent Chicago casino subject to conflicting speculation.
Sector watch provides a brief history of Esports Entertainment.
And now I wanna approach ya, but we've been keeping this a secret.
Shares watch
The word on the Street: M&A chatter provided the fuel for a near 13% rise in the share price of Penn Entertainment this week to date, as rumors regarding potential white-knight bidders were given some presumptuous credence by news of the appointment of an M&A specialist at potential bidder Boyd Gaming.
Two and two makes five: Sources speaking to Earnings+More poured cold water on the connection, suggesting the move to have Michael Hartmeier, the former head of gaming and leisure investment banking at Barclays, installed on the board was merely a coincidence.
“I think it’s a stretch,” said one investment insider.
“He’s clearly an experienced M&A advisor, but I don’t think Boyd is naming board members based on any single potential transaction.”
Action/reaction: The share price reaction comes as activist investors scored a win in last week’s proxy votes with over a third of shareholders rejecting Penn’s executive compensation plan. It followed in the wake of investor Donerail’s public attack on the company’s board and what it claimed was mismanagement of the interactive business.
Notables: The near 13% share price rise meant Penn was among the most notable share price movements for the sector this week while potential bidder Boyd was also up nearly 3%. Similarly subject to activist investor attention, Caesars was up over 5% this week.
Up and down under: Contrasting fortunes in Australia this week. Heading the notable positive movers was Tabcorp, which closed out the week up nearly 8% after a 10% leap on Friday. Meanwhile, PointsBet was down 14% on the week.
Flutter Entertainment suffered a poor week in the US, down over 5% in contrast to nearest rival DraftKings, which is up nearly 4% in the week to date.
🥊 The tale of the tape: Flutter vs. DraftKings this week
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+More
Light & Wonder has approved a new $1bn, three-year shares buyback program, which replaces a prior $750m plan that was set to expire next year. The latter program of buyback was fulfilled on Thursday when the company purchased over 11.2m shares or 11.5% of its outstanding shares.
Malaysian casino giant Genting Berhad is still exploring the addition of a US listing alongside its primary listing on Bursa Malaysia, which the company said could unlock greater investor interest in the business.
By the numbers
North Carolina: The sales of digital instant lottery tickets have exceeded $1bn since launch in November, according to the state lottery, with revenues of $122m exceeding the initial forecasts of $100m.
Read across
Stamp of approval: The Token Word led with Robinhood’s move to buy Bitstamp for $200m and further its footprint in the crypto exchange space. Plus, a chat with new crypto casino founder Zach Bruch from MyPrize.
What we’re reading
Gaslighting: The New Yorker provides a glimpse into the SEO policy changes at Google.
‘The area is crawling with construction workers erecting five-star resorts’: Bloomberg on the new gold rush in the Gulf.
Spam filter: the long-lasting love affair between Hawaii and Las Vegas. A foodie journey.
Head of Finance – London
Denmark Country Manager – Malta
Head of Product – London
Bally’s Chicago bears
If you leave me now: The to and fro over whether Bally’s will get to build its $1.7bn permanent casino property in Chicago and, if so, when, has been rumbling all week after Mayor Brandon Johnson cast doubt on the project being built, saying its fate was “still to be determined.”
A Bally’s spokesperson responded via local media, stating the project remained on track.
Woin o’clock: But now Alan Woinski, CEO of Gaming USA and editor of the Gaming Industry Daily Report, told the Chicago Sun-Times that is unlikely to hit the September 2026 deadline for the permanent casino, if at all.
He suggested the current $800m funding still needed to complete the project would come with a “very, very high” interest rate.
“It just makes it that much harder for that property to achieve profitability,” he told the paper. “It doesn’t help anyone.”
Let’s do the show right here: Woinski suggested Bally’s might end up scrapping the attempt to build a permanent entertainment and gaming venue at River West and just expand upon the temporary facility, which opened at the Medinah Temple in September last year.
“Build it out. It’s not going to cost as much. It’s the next best thing,” he said.
Recall, Bally’s is currently the subject of a bid from major shareholder Standard General to buy the 77% of the company it doesn’t own and take the company private.
Analysts takes – social casino
Lost compass: The team at Macquarie has refreshed its views on the social gaming providers, including a downgrade on Playtika to Neutral from Outperform and lowering its target price to $9. While Macquarie acknowledged the company’s market-leading status, they added it has “struggled” to come up with a winning post-pandemic strategy.
The team noted the social casino portfolio “remains a drag on performance.”
“Efforts to diversify into adjacent genres have so far floundered,” they added.
Road to perdition: Macquarie said the Playtika management has “committed” itself to further M&A despite what they suggested is a patchy record. “Playtika has plenty of cash, but it may be tough to find accretive deals given the level at which its shares currently trade,” they added.
Strategically, the analysts said they needed to see “improvements” and were “concerned that there could be a period of disruption before they materialize.”
Regional casinos
Chop ’til you drop: Data from the team at Jefferies showed casino foot traffic was up 5.1% YoY, with key markets remaining choppy. Ohio and Pennsylvania were up 12% and 13% respectively, while Atlantic City was up 5% YoY and Illinois was up 10% YoY.
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Sector watch – Esports
Goodbye my lover, goodbye my friend: With the departure of CEO Grant Johnson and a delisting from Nasdaq, Esports Entertainment has largely moved away from its previously aggressive acquisition strategy and instead been shedding assets in a bid to reinvigorate the business.
A brief history in time: The acquisitions under the Esports Entertainment brand include:
July 31, 2020: EEG acquires Argyll Entertainment (online sportsbook and casino)
January 21, 2021: EEG acquires Esports Gaming League (event management and team services)
March 1, 2021: EEG acquires Lucky Dino (online casino)
June 1, 2021: EEG acquires ggCircuit (cloud-based management for gaming centers)
July 13, 2021: EEG acquires Bethard (online sportsbook, casino and DFS)
The company officially commenced revenue-generating operations upon the acquisition of Argyll Entertainment in July 2020, having been trading as VGambling since 2014 and Esports Entertainment from 2017 onwards.
The bulk of revenue operations stemmed from Argyll and Lucky Dino’s online gaming operations, with very little coming from esports-related activity.
As things currently stand – with Argyll being closed since December 2022, Bethard since Feb 2023 and EGL since June 2023 – all that remains as a primary revenue driver is grey-market facing Lucky Dino.
Of total revenues of $1.7m for three months to Mar24, 59% stemmed from Lucky Dino, with the remaining $723k coming from esports and other. The company has revealed substantial doubt about its ability to continue as a going concern, with just under $1m in available cash-on-hand and net current liabilities of just shy of $8m.
Punches thrown: The company was embroiled in three legal cases with its former CEO, which have been settled with an aggregate payment of $500k to the departed executive.
Additionally, it is going to arbitration in a case against Metaverse Partners, which is claiming $5m against Esports for breach of contract, fraud and defamation.
The promised land: Perhaps Vie.gg, Esports Entertainment’sesports exchange product, most famous foray was a partnership with Bally’s to launch an esports betting exchange product in New Jersey in 2022.
After three months of operation, the company had generated just $17 (seventeen) in GGR. Total GGR in 2022 was $590.
Calendar
Jun 18-20: Canadian Gaming Summit
Jul 17-20: National Council of Legislators from Gaming States, Pittsburgh
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