888 VIP compliance scandal, CEO sacked
888 admits to VIP failures, Ontario’s success, Grilla funding round, datalines – New York, the week ahead, the shares week, startup focus – humbl.ai +More
Good morning. On today’s agenda:
A compliance blow up with 888’s VIPs sees CEO depart.
Ontario shows how it’s done when it comes to channeling.
Grilla’s new funding round brings in Tusk.
New York YoY comps show extent of promotional spend last year.
Our startup for the week is recruitment tech provider humbl.ai.
One touch gives me chills and we ain't even close yet.
888’s compliance scandal
CEO goes as company says Middle Eastern VIP suspensions will cost it 3% of group revenues.
Scandal! 888 has immediately suspended VIP customers from the Middle East region after an internal compliance review uncovered AML and KYC failures. The company said “best practices have not been followed” but claimed the deficiencies were “isolated to this region only”.
Pazner out: At the same time, CEO Itai Pazner, who has led 888 for the past four years and been with the company for 20, has left, also with “immediate effect”.
In an update, the company announced CFO Yariv Dafna, who was due to leave his post in March, will remain with the company at least until the end of this year.
“It is unlikely to be a coincidence that his resignation has occurred at the same time,” said the analysts at Regulus.
Question time: The news leaves it open as to which jurisdiction the transactions with the VIPs would have fallen under. Whichever licensing authority it is will be unlikely to look kindly on events, suggested sources.
In March last year, 888 was fined £9.4m for compliance failures by the UK Gambling Commission. The company was previously sanctioned in 2017, when it was fined £7.8m.
Meanwhile, the banks involved with 888’s recent refinancing will also be looking at the covenants. “Banks tend to get upset about AML failures,” another source deadpanned.
We’re out: Notably, Entain said earlier this month it was exiting its remaining unregulated markets.
Possibly not unrelated: 888 has laid off dozens of staff at its 590-strong office in Tel Aviv, Israel, according to reports from a news site called CTech. Analysts at Regulus said this “may also be relevant”.
Situations vacant: “888 now has the problem of finding a CEO who wants to take on an operational turnaround, intense regulatory scrutiny, high debt, UK retail exposure and gambling reputational risk,” said Regulus.
“Legacy dotcom operators and those seduced by c-suite perks need to be ruled out: the Venn diagram of able and willing is dangerously narrow, in our view.”
Compliance+More: Tomorrow’s newsletter will have more on the story. Sign up here.
Catch a falling knife: Shares fell over 20% in early trading this morning.
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Ontario’s channeling success
The new regulated market is hitting the mark in terms of minimizing gray market activity.
GGR in the three months to December rose 71% QoQ to C$457m from handle that soared 91% to C$11.5bn in what the analysts at Regulus said was an “extraordinary pace of growth”. iGaming Ontario noted the number of operators rose 50% over the period to 36; the number of sites rose to 68, a 62% increase.
Noting that the regulated growth is not necessarily overall market growth, the team at Regulus suggested Ontario has been successful in minimizing the previous gray market.
“Ontario’s relatively open licensing, product, marketing and incentives regime has been very effective at driving channeling,” they added.
Regulus said the black market is likely now down to ~C$200m a year in Ontario.
This will close further should the crypto-led Stake.com get licensed.
“The pace of Ontatio’s regulatory channeling demonstrates the speed at which consumers and operators can rapidly respond to effective regulation,” the team said.
Regulus pointed out that Ontario Lottery and Gaming’s online revenue has “not been distorted” by having to compete with commercial operators. OLG’s revenues have grown by a CAGR of ~65% to C$430m between 2019-20 and now, and ~20% market share.
Instead, all the regulatory environment is doing is “getting out of the consumer’s way”.
“There is no doubt that significantly increased advertising, more operator choice and easier payments accelerates the adoption of online gambling,” Regulus said.
“What we have seen is lightning-fast channeling and digital maturity, in our view, as regulation finally caught up with existing consumer practices and pent-up demand,” the team added.
One unhappy punter: Not everyone is quite so enthusiastic about Ontario’s success in converting gray market operators to regulated entities. On the BetMGM investor call last week, CEO Adam Greenblatt bemoaned the tough competitive environment in the province.
Gray market operators that are not choosing to participate in the regulated market “are still there”, he told analysts.
“And those that have chosen to participate in the regulated market are giving it a go and have more tools to advertise now because they are regulated.”
As one source said of Greenblatt’s dilemma: “If BetMGM was going to smash it in Ontario, Entain wouldn’t have bought Sports Interaction.”
Datalines – New York
Wells Fargo says the second full week of YoY comparisons shows promotions are now more targeted.
What dreams are made of: The second full week of year-on-year comparisons offer some insight into the evolving New York market, suggested the team at Wells Fargo. They pointed out that with GGR rising 33% in the week to January 22, but with handle off by over 21%, it indicated last year’s handle was “buoyed by promotions”.
The GGR growth was “attributable to favorable NFL divisional outcomes, better product offerings and targeted promotions”, said the analysts.
All about the football: Handle is likely to continue to decline by the YoY metric, they added. This contrasts with other states that have seen handle growth. Michigan, for instance, was up 30% in its first YoY, Virginia 51% and Arizona 27%.
The team noted that the NFL playoffs are NY's busiest wagering period.
The NFL divisional round weekend last year ended up being the highest handle week of the year.
The other three highest weeks of handle for NY in 2022 were the NFL's wildcard round, the Super Bowl weekend and the conference championships.
Analyst takes
Caesars: The combined $4bn of news notes and credit facility raised by Caesars last week – both elements of which were upsized – could be a “catalyst” for the sector, suggested Jefferies. The team noted the raise looks to have been “catalyzed” by the expectation that the Fed is finished with raising rates.
Although Caesars has more refinancing to come, the analysts expected the deal “should draw attention from others in the sector with high-cost debt and should be positive for stocks”.
Grilla raise
The Miami-based esports and skill games platform has raised $3m and gone live with a beta offering.
Just tell me that you want me: After receiving funding from well-known VC Tusk Venture Partners, the all-in-one platform provider has already attracted 20,000 registered users. The platform allows users to wager on any type of video game or skill-based competition.
Via the platform, users can create tournaments and play PvP matches with crowdsourced prize pools and the ability to contribute to players' entry fees.
It is launching with video games including Call of Duty, Madden, Street Fighter and NBA2K.
The company said that, in beta, users have hosted over 1k tournaments
It said the new funding “replaces archaic forms of tracking games such as spreadsheets, white boards, cash boxes”, instead providing a digital solution.
In it to win it: Evan Kaylin, CEO and founder, said Grilla was “founded on the principle that you don't have to be a pro to compete like one”.
Who’s Tusk? Tusk Venture Partners was previously invested in FanDuel and Coinbase. It is run by Bradley Tusk out of New York.
The week ahead
PointsBet will be updating the market late on Tuesday, ET. Of interest will be any further news on the reported A$250m bid made by NTD, the company behind the Australian Betr business.
A recent edition of E+M’s Deal Talk suggested the deal might help with PointsBet’s situation in the US where the losses continue to be a drag on its finances.
On Wednesday morning, Entain will provide a Q4 trading update. Last week’s update from BetMGM gave an insight into how the US joint venture was faring, news that was accompanied by the usual analyst chatter over whether MGM would come back with a bid for its partner.
On Thursday, live gaming and iCasino supply giant Evolution will produce its Q4 earnings. Analysts will be hoping to hear more about whether the company has managed to turn things around with its RNG offering.
Recall, CEO Martin Carlesund said the 11% increase in RNG revenues in Q3 was “not satisfactory” and the group needed “to accelerate rollout to get more games out”.
A busy week will also see an Earnings Extra released on Thursday afternoon as Penn Entertainment hits the wires. When the company last reported in Q3 it told the market that losses in its online business had widened.
The next issue of Compliance+More will be released on Tuesday including reaction to UK gambling minister Paul Scully’s generally well-received speech at the Betting and Gaming Council AGM.
The shares week
The listed data providers enjoyed a good week with both Sportradar and Genius Sports seeing double-digit surges.
It’s just the sun rising: Both the listed suppliers will be hoping the tide has turned for investor interest in their stocks after each suffered along with other key betting and gaming stocks in the latter half of 2022.
🔥 Sportradar and Genius Sports sitting in a tree
Startup focus – humbl.ai
Who, what, where and when: Humbl.ai was established by Alen Kojadinovic, who was previously head of casino at the affiliate firm Acroud.
The Tallinn-based group‘s focus is on bringing AI and automation to a modular suite of tools for iGaming and ecommerce clients and is seed funded by Leo Ventures, the investment fund set up by LeoVegas.
Kojadinovic says Leo Ventures and his team are “building everything together and ensuring we‘re bringing real solutions to the market”.
Funding backgrounder: Humbl’s last funding round was in December when Leo Ventures invested €250k for 25% of the company with the option to increase its ownership.
The pitch: Kojadinovic says his goal is to see the “real adoption of AI and automation tools within the iGaming industry” and across all geographies. The reaction from industry stakeholders has so far been “overwhelmingly positive”.
“With the seed funding secured, we aim to commercialize the first module in Q1. We have showcased the software to another Tier1 operator and the response has been overwhelmingly positive.”
What will success look like? Kojadinovic says it is too early – “hopefully a decade away” – to think of exits or selling up.
In the meantime, the focus is firmly set on developing “numerous modules empowering iGaming and e-commerce clients and their workforce with AI and automation. I also want to build a strong core of developers and reach break-even in terms of operational cash flow in 2023.”
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To find out more visit: https://www.rokker.co.uk/
Affiliate M&A
The somewhat mysterious transaction that E+M wrote about late last year that saw Acroud snap up Catena Media’s paid media business also saw former SBAT founder Gary Gillies switch with the business. He has gone on social media to say that he is the third-biggest shareholder in the company with 11% – and had been foiled in his attempt to grab more.
Newslines
DraftKings and beer giant Molson Coors Beverage Co. are reported to be teaming up for an ad to be run during the Super Bowl.
Red Rock Resorts will open the Wildfire Casino in downtown Las Vegas on February 10, according to reports.
MGM and the NFL Players Association will collaborate on creating new content and fan experiences with current and retired NFL players.
Calendar
Jan 31: PointsBet
Feb 1: Entain Q4 trading statement
Feb 2: Evolution, Penn National, Boyd Gaming
An +More Media publication.
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