Apr 4: Ontario is go
Ontario launch, WE+M startup funding quarterly survey, Jefferies digital update, New York and Nevada data, GiG complete Sportnco deal +More
Good morning. On today’s agenda:
Ontario sports-betting and igaming is good to go.
The WE+M startup funding quarterly survey shows investor enthusiasm for gambling-related regtech.
GiG completes its acquisition of sports-betting backend provider Sportnco.
Ready lets go. Click below:
Ontario launches
On the launchpad: Ontario’s OSB and igaming markets launch today with a fully-laden offering of big US names, previously grey market operators and freshly put-together specifically Canadian brands.
TheScore went live at 12.01 ET this morning.
Missing in action: However, not featured at the starting gate, it would appear, is DraftKings despite Jason Robins saying on the company’s Q4 earnings call that it was “looking forward to launching there”.
Start your engines: Writing in the Toronto Sun this weekend, CGA CEO Paul Burns said the new regime addresses the “inequity” of the existing grey market. He added that it was vital that Ontario’s land-based operators now had the “proper framework”. He also pointed to the investment from online operators to the Ontario economy.
Paul Burns: “Now, the province can use iGaming to encourage companies to invest in Ontario as this market is being developed in a responsible way to ensure it is sustainable.”
Up against it: Jefferies say the nature of the Ontario “transitioning” from grey market to regulated will provide the former operators with an advantage and will result in “different market share dynamics than the US”.
** SPONSOR’S MESSAGE: Spotlight Sports Group, a world-leading technology, content and media company has released a new white paper detailing the sports betting opportunity for publishers across North America. The paper investigates the size of the market, the revenue models available and the changing behaviors of sports fans.
Outlining the keys to success, the research also discusses Racing Post's successful journey from a traditional digital publisher to super affiliate.
Click here to download the full white paper.
BREAKING NEWS: The CEO of UK-listed affiliate XLMedia Stuart Simms has resigned to “pursue other interests”. He joined the company in Jul19 from Rakuten. He said that in his time at the top he had “de-risked” the core business and moved the company's operational focus towards North American sports betting.
In its recent FY earnings, XLMedia said revenues from US sports betting sites grew 178% to $31.4m while total revenues were up 21% to $66.5m and adj. EBITDA rose 47% to $17.9m.
Startup funding - Q1 survey
WE+M has been tracking the funding round announcements for companies in the betting and gaming space. Here are some of the trends from the first quarter.
Money raised: At least $46.1m
Biggest funding round: $12.2m for Spanish-language DFS provider Draftea
Popular business areas: Gambling regtech (x3), fantasy sports (x2)
Significant investors: SeventySix Capital (x2), Avenue H Capital (x2)
Q1 fundraising
Source: Wagers.com Earnings+More
Regtech in focus: The three gaming-related regtech companies are evidence of compliance increasingly being an area of interest for investors. The three companies involved in funding rounds this quarter work in varying fields; regulatory databases and consulting firm OddsOn Compliance, geolocation services for XPoint and automated due diligence platform Synalogik.
Sports-betting the driver: Sports betting and fantasy sports remain a huge area of interest as our data shows. Of the 13 funding rounds collated, seven include some form of sports-betting or fantasy sports focus.
Significant names: Sports-betting and gaming specialist investors including SeventySix Capital, Sharp Alpha and Benjie Cherniak’s Avenue H Capital each completed two investments while Accies, Bettor Capital and iGaming Ideas also make appearances.
Famous insiders: Well-known serial investors from the sector involved are also represented this quarter including Mark Blandford, previous founder of Sportingbet, Nigel Eccles, the founder of Fanduel and Andrew Black, the founder of Betfair.
Outsiders: Big names from outside the world for betting and gaming include the Raptor Group (run by Jim Pallotta, ex-Tudor Investment Corp. founder), VC house Sequoia and esports and gaming investment specialist BITKRAFT Ventures.
Note: Also receiving funding this quarter was WSC, the AI-powered highlights provider which raised $100m. Though the funding will go in part to building its capability with regard to betting and NFTs, it is not its main business at present and hence has not been included in the survey.
Roundhill ETF closures
No interest: Roundhill Investments has announced it will be closing two of its ETFs later this week, its MVP pro sports ETF and the SUBZ Streaming ETF, due to a lack of investor interest.
Roundhill continues to offer its BETZ Sports Betting ETF as well as stocks aimed at esports, the metaverse and meme stocks.
Jefferies digital update
Cheap doesn’t cut it: Looking at what they say is “dramatically shortened” market patience with digital gaming stocks, the team at Jefferies suggest a “revised look at the value opportunity is warranted”.
Can you feel it? Jefferies sum up the Street’s shift towards a “more conservative stance” on profitability thus:
Jefferies: “Can companies that invest $500M-$1.5B toward building a revenue base achieve profitability and ultimately returns in excess of this investment?”
On the spectrum: Naturally enough, Jefferies believe they can but believe there is a “clear spectrum” of opportunity when it comes to the universe of stocks. One they identify as a clear winner is Gambling.com which they see as benefiting “compelling” fundamentals.
“Its positioning as a provider of market share at a time when operators are investing considerable sums in building revenues suggest its role is key.”
Grow your own: One development in the space which has “evolved in surprisingly important ways” is B2B. The largest players have ownership or control but behind them, the picture becomes “less consistent” with operators using outside providers “with varying results”.
“The bottom line is, effective sustainable market share does require ownership and control of the technology stack, with Rush Street Interactive being the one exception thus far that has performed reasonably well using outside entities.”
They add that the “positioning” of B2B providers has “evolved in different ways”. Notably, GAN and Kambi’s positioning as platform providers “has apparently diminished”.
The shares week
Speaking of GAN, the company’s share price suffered a bad week, down 11% in the past week and 77% down in the last 12 months. Rival Kambi, meanwhile, is off by 55% over the same period.
Tekkorp Capital launch
Team building: Tekkorp has launched an advisory arm and has added ex-William Hill Online CEO Crispin Nieboer to the team. Tekkorp is led by Matt Davey, CEO, and Robin Chhabra, president, and has also added Andy Clerkson, former founder of Grand Parade, as a partner.
Nieboer noted the team had worked on a combined $24bn worth of deals in the online gambling space. “This knowledge of what works from an operator standpoint in M&A is the real key difference between Tekkorp Capital and other advisory firms in our industry,” he added.
Deal pending: Tekkorp also managed the Tekkorp Digital Acquisition Corp. SPAC currently seeking a merger with Caliente’s CaliPlay.
GiG complete Sportnco deal
Gig workers: Gaming Innovation Group has completed its €51.4m acquisition of Sportnco announced in Dec21, paying €27.9m in cash and the rest in shares. At the same time, New Zealand’s casino operator Sky City has invested €25m in GiG, largely covering the cash element of the deal, and making it an 11% shareholder.
Sweat it out: Sportnco shareholders will also be entitled to a two-year performance-based earnout of up to €11.5m for 2022 and 2023, payable in cash and shares. Hervé Schlosser, Sportnco CEO, will remain in charge of the unit.
For 2022, the combined business is forecast to generate revenues of between €87-€93m and EBITDA of €30-€35m.
Breaking news: GiG has announced that it will supply its sports-betting platform to Betway in Portugal via Sportnco’s sportsbook and player account management (PAM) system. The latest launch is the second one Sportnco has managed for Betway following its entry into the French market last year.
NeoGames initiation update
Neo digital: Jefferies has initiated coverage of NeoGames with a positive assessment of the group’s online-lottery platform that it runs as part of the NeoPollard Interactive joint-venture. The analysts said the vertical could enable the group to double its EBITDA figures (FY21 $33.4m) in the long term as more states legalize their digital lottery offerings.
Jefferies added that just eight states currently offer regulated online lottery products and up to 33 states could legalize, and sales could go from $5bn today to over $38bn if all 33 states legalized.
Competing for contracts: NPI’s iLottery programs had been highly successful, producing “sales per capita in MI, VA, and NH over 2x states (those) run by competitors”. Jefferies said the addition of Aspire Global’s sports-betting and gaming platform to the NeoGames product portfolio “could help the company win new iLottery contracts”.
Regulatory roundup
Kansas lawmakers confirmed to Wagers.com that a deal is in place to advance a sports-betting bill in both the House and Senate. The suggestion is that there is now every chance that legal wagering will now be approved.
Minnesota lawmakers advanced an online sports-betting bill to the House ways and means committee, one of the most important stops in the legislative process. If advanced out of Ways & Means the bill still must pass out of the full House and Senate. The bill would allow tribes to operate sports betting at their casinos and via statewide mobile. Off-reservation mobile bets would be taxed 10 percent.
New Jersey Assemblyman Ralph Caputo is considering a push to amend the state law banning betting on in-state college teams in the wake of St. Peter's recent Elite 8 run.
The week ahead
Entain publishes its Q1 update on Thursday. During the group’s Q4s in January CFO Rob Wood said the business was “up against very strong margins” in H121, but things should improve throughout H122. Analysts will also seek clarity on recent acquisition Unikrn which it said recently it would be relaunching.
Datalines
New York week to March 27: Weekly handle fell 26.%% to $327.8m while OSB GGR was $13.9m, the lowest take since launch.
FanDuel continued to lead with $133m in handle and $9.5m in GGR. DraftKings grabbed $83m in handle and $1.86m GGR while Caesars Sportsbook came in at $56.9m and $2.3m respectively. BetMGM achieved $36.3m handle and minus $432,577 GGR.
Further reading: Relations deteriorate between Gov. Hochul and the Seneca tribe.
Nevada Feb22: Strip revenues of $599.1m was up 1.2% on Feb19 while locals rose 19.4% to $223m while total GGR was up 10% on Feb19 and 44% YoY to $1.11bn. Strip slot win of $337m was up 25% on Feb19, helping to offset a 20% fall in table GGR vs. Feb19.
Sports-betting GGR was $30.9m on handle of $780.8m (mix: 66% mobile/34% retail). Implied hold was 4%, with mobile at 1.8% for $9.1m of GGR and retail at 8.1% for $21.9m GGR.
Analyst reaction: Wells Fargo pointed to the improved sequential trends as had been predicted by the “gradual” recovery chatter on recent earnings call commentary. For March, Macquarie are predicting further gains (est. 21% up on Mar19). They note that QTD Strip GGR is up 4% on Q119.
Virginia Feb22: Online sports betting handle was down 17.2% to $402m as the NFL season closed and $33.1m was wagered on the Super Bowl. Gross revenues were $7.9m and margins 6.8%.
Arizona Jan22: Handle rose 13% MoM to a record of $563.7m while revenue was up 13.5% to just over $40m. However, operators gave away ~$20m in free bets. Players wagered $3.9m in DFS entry fees for pre-tax profits of $431k.
Rhode Island Feb22: Sports betting handle was down 27.7% to $42.1m, with $23.4m wagered online and $18.8m played at the state’s two retail sportsbooks (Twin River and Tiverton casinos). Revenue was up 125% YoY to $3.6m but down 30.8% MoM. Online revenue was $1.9m, retail $1.7m.
Macau Mar22: GGR was down 55.8% YoY and -52.7% MoM to $460m. Looking at visitation and hotel room supply and occupancy data for Feb22, Deutsche Bank said Q122 GGR fell 25% YoY and -77% vs. Q119 to $2.22 bn vs. $27bn forecasts.
Newslines
Safe launch: Paysafe has announced that it is also live in Ontario. The group has processed online payments for the Ontario Lottery and Gaming Corporation (OLG) since 2015 and has confirmed PointsBet and theScore Bet as clients in the province. It will be announcing new partners in Ontario in the coming weeks, it added.
Plan responsibly: The Parx Casino and BetParx brands have joined the American Gaming Association’s (AGA) ‘Have a Game Plan. Bet Responsibly’ campaign. Both brands will promote responsible gambling messages and consumer education at its retail sportsbooks and throughout all digital channels.
Legal eagle: Mohegan Gaming & Entertainment has appointed Raymond Lin as its new chief legal officer. Lin will advise on all legal matters and head the MGE compliance and risk management teams. He will report to chief executive Ray Pineault.
Harness operations: WatchandWager.com has extended the lease of its operations at the Cal Expo Harness racetrack until 2030. Its current deal was due to expire in 2025, the extension did not require any further approval from regulators as the group is already approved by the California Horse Racing Board.
What we’re reading
The joy of March Madness: America’s weirdest sports ritual.
The new wave: With much of European football run by either oligarchs, state-backed wealth funds or major corporates, The Athletic runs the rule over the new sponsors flocking to the beautiful game.
On social
Licking his Champions League wounds: PSG President Nasser Al Khelaifi’s says clubs needs to be first on “digital, OTT media, bitcoin, NFTs” to become leaders.
Calendar
Apr 7: Entain Q1
Apr 7-8: All American Sports Betting Summit, New York
Apr 12-14: ICE, London
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com