16 Jun: DraftKings analysts mount Hindenburg defence +More
DraftKings analyst reaction, Michigan SB GGR May, Massachusetts GGR May +More
Good morning. The analyst response to Hindenburg Research’s allegations against DraftKings and its B2B platform SBTech is our lead item. In state news, Michigan’s May SB GGR confirms Barstool’s market share slide, Massachusetts GGR for May and unlisted Sportnco’s FY results.
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DraftKings analyst reaction
Come at the King: No one involved in the sector would have been surprised by much that was in the Hindenburg short-selling attack yesterday on DraftKings. Allegations around black market activity and illicit operations at the SBTech B2B arm had an immediate impact with DraftKings suffering a 10% fall in pre-open trading. But despite the wide-ranging allegations, Hindenburg might have hoped that fall would have been more dramatic. Indeed, at market close the falls were restricted to just over 4%.
China crisis: Analysts at Truist said the limited reliance on SBTech’s B2B revenues (target of 4% at maturity according to a Mar21 presentation, circa 8.6% in FY22) and the historic nature of the allegations means the harm to DraftKings is limited to its reputation market sentiment. (It is maybe a moot point that the de minimis nature of SBTech’s revenues wasn’t the message at the time of the merger). The overhanging issue largely comes down to how much SBTech takes from China in particular, under reseller agreements, and how much that might affect DraftKings licensing prospects.
“Short of DraftKings knowingly profiting from illegal black markets (which we view as highly unlikely), we don't see a real risk of regulators moving to ban DraftKings,” said Truist.
Can of worms: Jefferies analysts suggested regulators in states such as New Jersey and Pennsylvania might “feel compelled” to examine exposure to grey markets “more closely going forward”. “This could have an impact on the value of our TAM if a change in the timing of market activation were to become longer, not just for DraftKings but for all prospective operators.”
Fall-back options: Credit Suisse pointed out that SBTech’s value on DraftKings was its technology rather than the legacy B2B business. “If SBTech revenue were to go away entirely, we think there would be minimal impact on the DraftKings stock,” they added. Notably, CS pointed out that DraftKings was still operating on the Kambi platform and should there be any issues with SBTech it would “not necessarily interfere with betting operations today.” However, it might be said that an admittance of failure in moving to the SBTech platform might be more damaging to DraftKings than any allegations of previous misdeeds or of current grey market attachments.
Michigan May GGR
The top line
Betting handle dropped 4.9% to $237.6m and total betting GGR was $21.2m, $19.5m of which was generated on mobile. iCasino GGR was flat sequentially at $94.9m. Physical casinos generated $107.9m GGR in May, a 14.2% drop on May 2019 and up 0.5% MoM. DraftKings led the promotional spend at $2.7m.
Stool pigeons: It’s doubtful Dave Portnoy will be talking much about Michigan after the May data showed Penn National’s Barstool Sportsbook’s continued market share slide, down to just 7.7% from 23.9% in the launch month of January. While this is very early days and market shares - particularly of handle - need to be taken with a truck’s worth of salt, it will be worrying all the same for Penn, suggesting its strategy of establishing a foothold by placing Barstool operatives in state at launch has only a limited long-term effect. The data shows FanDuel maintaining a steady lead at 30% share of handle while DraftKings regained second with 28.1% and BetMGM came in third at 21.7% share. DraftKings, Golden Nugget Sportsbook, BetRivers Sportsbook and Four Winds Sportsbook were the only four of the 12 operators to see a monthly increase in handle in May.
Meanwhile, BetMGM retained its iCasino market share lead at 38%. FanDuel was second with 17.2%, DraftKings was third with 16.5% and WynnBet was fourth with 4.6% share. In land-based, the state’s commercial casinos generated GGR of $107.9m, down 14.2% on May19 but up 0.5% sequentially.
Massachusetts GGR May
Back off: GGR for May was down slightly (0.9%) sequentially at $86.7% and down 9.1% on a same-store basis on May19. On absolute terms, revenues were up 133.4% on May19 as the Encore Boston (which opened in Jun19) effect continued to sway the numbers. The property led the way with revenues up 5.5% MoM to $52.9m, above analysts estimates. The MGM Springfield was down 4.6% on May19 at $21.3m and down 3.1% MoM. Plainridge Park generated GGR of $12.5m, down 15.8% on May19 and off by 0.2% MoM.
Sportnco
The top line
Revenues for FY20 were up 37% to €19m and EBITDA up 68% to €6.1m B2B was up 89% to €10m while B2C rose 9% to €9m. Post-tax profits were up 50% to €1.8m.
Just super: Sportnco recently announced a foray into the US via a deal with DFS operator SuperDraft, where Caesars Entertainment has a strategic investment. More recent activity from Sportnco includes the buyout of the Spanish-based Tecnalis iGaming PAM platform. The company said that was one of the key drivers of the revenue rise. By year-end, Sportnco boasted of having 36 gaming and betting clients across 13 markets globally.
Newslines
Ambulance chasing: The relaxed nature of the analyst response to the Hindenburg allegations didn’t stop a handful of securities fraud lawyers jumping on what they see as a potential shareholder claims suit.
Play delayed: The bill to legislate sports-betting in Ohio got through a key state senate committee stage but further measures were attached including an amendment that wouldn’t open the market until April 2022. The good news is that the amount of possible online licensees has been upped to 50.
What we’re reading
Well, what do you reckon?
What we’re writing
The convergence of media brands and sports betting continues as operators target increased in-play volumes and user engagement. For CDC Gaming.
The true cost of data: The deal for NFL data examined. For BettingUSA.
Calendar
17 Jun: New Jersey May data
22-23 Jun: Macquarie Technology Summit
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com