Distress signals
Signs of strife caused by markets maelstrom
Bally’s Star deal criticized, indebted operators hit, Rivalry’s ‘strategic review.’
Markets watch: Evoke rebounds, Better Collective leads affiliates upwards.
In +More: Seth Young joins High Roller, Sara Slane joins Kalshi.
Sports prediction markets could be worth over half-a-billion dollars, say analysts.
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In threes
Catch a falling star: Bally’s could have wished for a better response to its A$300m (~$187m) strategic capital investment in troubled Australian casino operator Star Entertainment, with the debt analysts at CBRE labelling the deal as a “distraction” and “concerning.”
The deal was completed on Monday, with Bally’s injecting the cash into Star in the form of subordinated debt and convertible notes. A third of the sum will be paid today, April 9.
Upon conversion, Bally’s will own 56.7% of Star. Bally’s said it will then split that stake with billionaire Bruce Mathieson, who will inject A$100m in return.
Out with the old: Cash-strapped Star Entertainment has been under pressure after its Sydney outpost was found guilty of major AML failures. Soo Kim, chair at Bally’s, indicated in an interview with the Australian Financial Review that the company would seek to clean out the previous management team.
“The definition of insanity is doing the same thing over again and again and expecting a different result,” he told the paper.
“We need to put different executives in there – this particular mix of executives has generated poor operating performance.”
Better use of your time: However, the analysts at CBRE noted Bally’s has better uses for the cash, either for the construction of the company’s permanent casino in Chicago or helping towards its own “balance sheet issues.”
The Star deal was “consistent” with the historical operating strategy of both Bally’s and major shareholder Standard General, the team said.
“However, utilizing restricted group liquidity for an equity investment in an entity that could ultimately be insolvent, at a time when liquidity is needed elsewhere in the structure, is negative in our view.”
Find the lady: The analysts added the deal “could be a distraction… diverting management attention away from domestic priorities.”
The accumulation of assets outside of its existing restricted debt arrangements was “also concerning,” they said, particularly given the group’s high leverage and the “distressed” trading prices of its term B loan and unsecured notes.
The analysts went on to stress the increased possibility that term loan lenders would “formally organize” as a result of the Star deal.
Will there be some pain? In his AFR comments, Kim suggested a turnaround could be effected “within a reasonable amount of time.” But the CBRE analysts were not convinced, suggesting Star has “underperforming” assets that may be subject to regulatory and cash needs.
The team went on to suggest the initial Bally’s investment “may be the first of multiple cash injections needed,” adding they were “cautious” on the company’s ability to turn operations around.
They noted Star reported A$175m in EBITDA in FY2024, down 45% YoY, with negative FCF and a reported ongoing cash burn today.
Leverage fears
Are you sitting uncomfortably? The team at Deutsche Bank noted “as expected” it was the most financially leveraged names within the gaming space that suffered the worst declines earlier this week, with Penn Entertainment and Caesars Entertainment being particularly vulnerable.
Debt service terms and lease obligations mean any changes to free cash flow stemming from “even moderate” changes of EBITDAR make valuations “challenging.”
For Caesars, despite a relative revival yesterday (up 2%) its shares are down 11% in the past month. As of the Q4 earnings Caesars has a debt-to-EBITDA ratio of 5.1x.
Down, down: DB noted that of the purely regional operators, Penn has fallen the most YTD, down 31% since the turn of the year. But the negative view coming out of the earnings was more about its faltering online efforts and the larger-than-forecast losses now expected in 2025.
Unravel-ry
Penny stock: Meanwhile, Toronto-listed and intermittently esports, GenZ and crypto-coin-focused Rivalry fell over 31% on Monday after it announced a strategic review to “maximize long-term stakeholder value.”
The company said the review would be led by XST Capital. In the meantime, it is tapping an existing investor for a short-term loan of $650k.
A shave and a haircut: The shares fell another 9% on Tuesday and are now valued at a mere 5¢.
This is nuts: Rivalry launched its own crypto token #RVLRY late last year, which enabled users via the Play-2-Farm mechanic to earn Nutz, which they could then exchange for Rivalry tokens.
CEO Steven Salz said at the time the token was an acknowledgement that there was a “division in online gambling, and the gap is getting wider” between the formative crypto-gambling space and the fiat-only sector.
The coin was short-lived, however, and is no longer trading.
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Markets watch
Hey Lazarus! Evoke staged a deathbed recovery on Tuesday, up nearly 20%, as the UK market continued to stabilise after Monday’s dramatic declines. Also enjoying a rare good day of trading was Better Collective, up over 11%, while fellow affiliates Gentoo (+6%) and Catena (+5%) were also on the rise.
Asian contagion: President Trump's intensifying tariff war with China meant Asian-based gaming stocks took a hit overnight, with Galaxy Entertainment and Sands China down ~5% and MGM China and Wynn Macau each off by ~3%.
Buy the dip: The recent share price falls for Flutter represent a buying opportunity for a company whose global OSB and iCasino exposure mean the company has “immaterial direct exposure” to tariffs, suggested the team at Stifel.
+More
The Young team: High Roller Technologies has appointed Seth Young to the role of SVP for corporate strategy and investor relations. Young was previously CIO at PointsBet and is a founding partner at Las Vegas-based GMA Consulting.
Gamekeeper turned poacher: Elsewhere, Kalshi has announced ex-AGA head of public affairs Sara Slane is to join the company in the role of head of corporate development. On LinkedIn, Slane said that never in her career had she seen a company that “combined bold vision, outlier founders, deep commitment to regulatory compliance, and astronomical growth.”
‘You complained, we listened’: Golden Entertainment’s Strat property is reported to be rowing back on less consumer-friendly 6:5 blackjack tables and is introducing more 3:2 tables after negative guest feedback.
VICI Properties said it has completed a $1.3bn debt offering. As previously announced, the company will use the proceeds to pay down existing senior notes all due this year.
Fanatics has reportedly shuttered its retail sportsbook operation at the MLB’s Cleveland Guardians’ Progressive Field less than two years after opening. The stadium cited the rise of online wagering in the state and lack of on-site customers on non-game days. This follows Caesars also closing its retail sportsbook at Rocket Arena, the home of the NBA’s Cleveland Cavaliers.
Noisy neighbors
Banging pots and pans: Prediction markets are “too loud to ignore,” the analysts at Citizens have suggested. The team argued that should the Commodity Futures Trading Commission find they are “outcomes not sports betting” it would “pave the way” for OSB operators to build and launch offerings in the vertical.
They added they might see a tax arbitrage take place, assuming prediction markets would not be subject to betting tax.
This would particularly be applicable in New York where single-outcome business could be pushed towards prediction offerings.
This might amount to less revenue – Citizens estimate take rates of 2.5% for prediction markets vs. ~10% for OSB – but higher EBITDA.
Whale watching: An advantage of prediction markets – as with betting exchanges – is that they could be a route to generate low-risk revenue from high-end players.
Here, the Citizens team cited evidence from Polymarket showing less than 1 million app downloads but billions of dollars of volume to suggest that it attracts sharps, VIPs and whales.
“Said another way, individuals could be using these sites to wager large sums of money, potentially in crypto, rather than coming onshore in legal sports-betting states,” the team added.
Larging it: The team also took a stab at a TAM estimate for sports-based prediction markets, suggesting that due to it likely being large-event dependent – the Super Bowl and March Madness, for instance – it would be restricted in the number of markets that would attract enough two-way liquidity.
The team estimated sports-only prediction markets could generate ~$555m of revenue annually with only a minor level of cannibalization of traditional sports betting.
This compares with Morgan Stanley’s estimate of $1.7bn for “straight bet” sports prediction markets, broadly split $900m in current OSB markets and $800m in non-OSB states.
Quick take
Robinhood: Analysts at Compass Point argued that of the ~$465m of betting volumes seen on the Kalshi platform, a “meaningful share” came from Robinhood users via the company’s event contracts platform deal.
Estimating that Robinhood has a take of 2%+, the team suggested the company might be able to earn $120m-$150m in revenue annually.
“While we tweak our forecasts to reflect the recent market sell-off, we believe incremental revenue from sports betting can offset some of these declines,” the team added.
“Sports betting can further reduce Robinhood’s earning volatility, even during an equity bear market.”
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Venture playground
In focus – OddsOn Models
Who are you? OddsOn Models is “a specialist consultancy and modeling business dedicated to empowering the sports-betting industry,” says Ollie Mackleworth, who founded the London-headquartered business in 2024.
What’s the big idea? The idea, says Mackleworth, is “simple,” to enable the sports-betting industry “to thrive, with high-quality, customisable models that are built for scalability, accuracy and market demands.”
OddOn focuses on the most popular sports-betting products, such as BetBuilder, which “requires granular modeling and dynamic integration,” adds Mackleworth.
“By offering tailored solutions and consultancy, we aim to fill a crucial gap in the industry – where companies often rely on off-the-shelf B2B models that lack adaptability or alignment with their unique needs.”
Among its services, the company offers bespoke model development, end-to-end support, ownership models – reducing dependency on third-party providers – and strategic advice.
KPIs: Although still in the early stages of growth, OddsOn has entered into a joint venture agreement with Sportsbook Training Services. The company has also launched its first sport, boxing, with a free trial that included a real-time settlement function.
Funding backgrounder: The business has been entirely self-funded to date, although it is open to exploring opportunities for strategic partnerships and investment to accelerate expansion.
Growth company news
P2P social betting platform Kutt has announced that former US Congressman Tim Ryan is joining as a senior advisor. Kutt was founded by CEO Sim Harmon and was the subject of an E+M in focus feature in April 2023.
Alexis Zamboglou is stepping down from his role as CEO at Blockasset after only six months in the position. He will be taking unnamed members of the Blockasset C-suite to join him in the launch of a Web3 betting and gaming venture called Oneiro Labs in the summer.
MightyTips is to provide its sports-betting predictions and reviews to Raw Entertainment’s crypto-based sports betting platform Roobet in Asia.
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Upcoming earnings
Apr 23: Churchill Downs (earnings)
Apr 24: Churchill Downs (call), Boyd Gaming
April 25: Gaming & Leisure Properties
Apr 29: Caesars Entertainment
Apr 30: MGM Resorts
May 1: VICI Properties
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