Suck it up
All pain, no gain for DraftKings and FanDuel in Illinois
OSB leaders have limited opportunities for mitigation in Illinois.
In +More: Betsson gives up on Dutch deal, Merkur rebrands Cashpoint.
Oz corporates corner: Mixi’s improved PointsBet offer, Escalante takes control at VGW, BetMakers’ Las Vegas bid.
Venture playground: In focus – UK predictor app LEBOM.
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The pain game
Don’t you think we’ve already tried this? Five years into OSB operations in Illinois, the chances that the leading operators will be able to mitigate the upcoming tax hike by way of the reduction of promo expenses is for the birds.
Such are the thoughts of Deutsche Bank writing about the Prairie State’s new top-tier tax of 50¢ on every dollar of GGR above $20m. GGR below $20m will be taxed at 25%.
The new tiers replace the five-tier system that was introduced in March 2024.
Those making less than $20m a year take a step back: The tax is aimed at squeezing more from the leading operators, with DraftKings and FanDuel being the only two operators on LTM numbers to have generated enough GGR to pay the new top tier.
In the LTM to March, FanDuel generated a GGR of $158m vs. DraftKings’ $146m. The next nearest competitor was BetMGM at $16m.
This is going to hurt: DB estimated that on the LTM figures FanDuel would have paid an incremental $74.2m in tax while DraftKings would have to stump up a further $67.9m. Each would see their pro forma tax rate rise from ~36% to over 51%.
Without further mitigation, Jefferies estimated that would translate to hits to prospective FY EBITDA of $72m at Flutter and $70m for DraftKings.
Down the back of the couch: The attempt to find mitigation will not be easy, however, suggested DB. Illinois “isn’t a new market,” with the OSB market having been open since 2020.
To think there is promo fat to be trimmed, they added, would be to believe that neither of the market leaders “has run their business in the state efficiently” for five years now.
“As such, we again note, operators can mitigate the EBITDA margin impact, but the degrees to which the EBITDA dollar impacts can be mitigated are limited,” the team said.
The dead shall rise again: Among other ideas for mitigation, Jefferies suggested both DraftKings and FanDuel might return to the idea of charging a surcharge, which was originally devised in response to the introduction of the progressive tax in March last year.
The plan was dropped less than two weeks after it was announced, with DraftKings suggesting it had received negative customer feedback.
All for one: That reversal came after Peter Jackson, CEO at Flutter, said FanDuel had “no plans to introduce a surcharge for winners.” Jefferies said they could only envisage the surcharge plan reappearing if it was “pursued in conjunction among all operators.”
“More likely, operators could offset the tax with subtle pricing changes on bets, which over time recovers the margin,” they added.
You do it to yourself, you do: Chris Grove from EKG suggested that anyone surprised by the news of the tax hike from Illinois hadn't been paying attention.
That’s what really hurts: “If the betting industry was caught by surprise in Illinois, it’s because they were asleep at the wheel,” he posted on LinkedIn.
“[Govenor JB] Pritzker has made it clear that he views OSB as an ATM he can tap without fear of blowback.”
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+More
Trouble Dutch: Betsson has canned its proposed acquisition of Holland Gaming Technology and Holland Power Gaming, saying the process of receiving clearance from the Dutch Gambling Authority had taken too long. The deal was originally announced in Feb24. Betsson said it will claw back the €26.7m payment, minus a break fee, and will now “pursue other business opportunities.”
Merkur has rebranded its Austrian-based sports-betting business Cashpoint to Merkur Bets. This aligns the branding with its B&M betting business in Germany, which recently changed its name from Merkur Xtip. Cashpoint was founded in 1996 and Mathias Dahms, MD for sports betting within Merkur, said the switch marked a “fresh start and a clear strategic focus” for the business.
Hanging in the balance: Codere Online has filed its Form 20-F, including its annual report for last year, which the company believes will see it regain compliance with the Nasdaq listing regulations. The company said it was recently issued with a share delisting notice.
SharpLink Gaming has closed its $425m private offering, led by Consensys Software and a range of crypto venture firms. The money is destined to be used to launch an Ethereum treasury strategy, which CEO Rob Pythian said was “pivotal” and “pioneering” but would also “strengthen” the existing affiliate business.
Mixi counters
Return of serve: The Japanese-based entertainment group Mixi isn’t giving up its attempt to buy PointsBet without a fight and has lodged an improved offer valuing the Sydney-listed company at A$1.20 (78¢) a share or A$402m. Its original bid valued the business at A$353m.
That bid was initially preferred by the PointsBet board but was bested by a cash and shares offer from the Matthew Tripp-led rival Betr worth A$360m.
The renewed bid represents a 44% premium to the prevailing share price before the news first broke in February.
Let this be an end to the matter: In its ASX notification, PointsBet said Mixi has indicated that if the new proposal isn’t recommended by the board it would launch an “off-market” takeover bid at the price of A$1.20 a share.
It would only need 50.1% acceptance from shareholders for this bid to be accepted. However, Betr is now thought to own over 20% of PointsBet.
Take the cash: PointsBet said its board “unanimously recommends” shareholders accept the new Mixi offer “in the absence of a superior proposal” and subject to independent assessment.
The shares were initially suspended on the news of the revised Mixi offer, but trading resumed today, Wednesday, and saw the price rise over 10% to A$1.20.
BetMakers Technology
The Australian-listed horserace betting technology provider has entered into a binding heads of agreement to purchase Las Vegas Dissemination Company, the only provider of pari-mutual wagering in the state of Nevada.
Escalante takes control
Clean sweep: Virtual Gaming Worlds founder and CEO Laurence Escalante is to take full control of the sweepstakes gaming operator by buying out investors who own the remaining 30% of the company he doesn’t already own.
The deal will value the operator of Chumba Casino, Luckyland Slots and Global Poker at A$3.3bn or ~$2.1bn.
I want it all: Under a scheme of arrangement with Escalante’s family office, Lance East, shareholders will have the option to receive cash at A$5.05 a share or take shares in a new special purpose bid vehicle.
Funding for the transaction will be provided through a combination of third-party acquisition finance and target-funding through a loan from VGW.
In a statement, Escalante gave a nod to the issues faced by sweepstakes gaming operators in the US by suggesting that, as the competitive landscape evolves, VGW faces “many new opportunities but also challenges and uncertainties.”
Risk-weighted: As reported by the Australian Financial Review, Mike Symons from specialist corporate advisory Canterbury Partners, who has been drafted in to work alongside VGW’s CMO Mats Johnson and run the buyout process, said the recent troubles played into the valuation.
He told the paper as part of its financial modeling it had “discounted which states we thought might be at risk.”
He added that the company had then “weighed every state in the US according to the probability of those states being able to continue.”
None of your business: The move comes less than a month after it was reported Escalante had told investors on a Telegram chat that if they did not trust his judgment they should sell up.
Sources told E+M at the time that the blow up was unrelated to VGW’s regulatory troubles in the US, where it has exited various states including, most recently, New York.
Instead, they insisted Escalante’s frustration was due to revelations about his personal life.
Taking a hit: Symons told the AFR that the disruption to VGW’s operations in the US had contributed to weaker earnings expectations in the second half of the company’s financial year, which he said would be 10-15% below the H125 number.
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Venture playground
Growth company news
Dabble has officially launched in the UK, its third major market after its home market of Australia and the US.
Betty has appointed Andrea Stodart, former head of brand marketing at Tata Global Beverages, as its new vice-president of brand marketing. In April, the Canadian-based iCasino community producer Betty raised US$15m to fund further growth through a new funding source called CadaCredit, a private credit platform focused on financing gambling businesses.
Sports predictions affiliate Golden Odds has acquired ThaiScore.com, which provides localized soccer content to Thailand.
In focus – LEBOM
Who are you? Founded by Chris Ricketts, Guy Phillips and Andrew Morley in 2021, UK-based LEBOM is a live social soccer predictor app that offers users a chance to create private leagues of friends, predict the weekend’s Premier League results and compete for a shared pot.
What’s the big idea? LEBOM is “tapping into the cultural shift where traditional betting is seen as taboo and openly admitting to gambling can make people feel uncomfortable,” says Ricketts.
He says the platform leans into the same social dynamics that drive Fantasy Football leagues and office sweepstakes, offering players a “fun, competitive way to test their football knowledge and instincts while keeping the financial stakes low.”
“LEBOM fills a clear gap in the market for a more social, responsible and genuinely fun experience,” he added.
The focus is on playing with friends, not against the house. “In LEBOM, you’re betting small stakes against people you know, within a closed group.” It includes limits designed to “keep it light, controllable and enjoyable.”
“We believe playing should be about competition and connection, not financial risk,” Ricketts adds.
KPIs: LEBOM targets first-time downloaders, known as ‘captains,’ who then invite friends to join and play. The company’s cost-per-acquisition for captains is sector-leading and, thanks to the network effect of player invitations, the overall CPA for a first-time depositor this season is under £5.
Retention rates are also strong: this past season, 85% of first-time depositors have returned to play again, an improvement of +11 percentage points year-on-year.
Additionally, 64% of players have participated in five or more games.
Funding backgrounder: LEBOM has raised £1.2m across three previous pre-seed and seed rounds, including contributions from friends, family and crowdfunding investors.
The company is currently in the process of raising a £2m Series A round, of which 33% is already committed.
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