Exclusive: FS seeking to install Alexander as 888 CEO
Exclusive: FS seeking to install Alexander as 888 CEO
Investor group’s plans to grab control, BetMGM future discussed, IGT’s sales options, startup focus – First Pitch Canada +More
Good morning. On today’s agenda:
FS Gaming Investments intends to ‘ring the changes’ at 888 from within.
Future of BetMGM now “somewhat binary”, says Deutsche Bank.
IGT’s options are discussed in analyst takes.
Flex Fantasy, Turnover Global and Linemate pitch in Toronto.
Active888
FS Gaming Investments hopes to get Kenny Alexander installed as CEO at 888 with Stephen Morana as CFO.
The boys in the band: The FS Gaming Investments vehicle headed by ex-GVC chair Lee Feldman and including Kenny Alexander and Stephen Morana hopes to persuade the 888 board to appoint the pair to the vacant positions at the top.
According to sources close to FS Gaming, there are no plans as it stands to bid outright for the business.
Instead, the company hopes to take on a quasi-activist role in the hopes of reviving 888’s fortunes.
It is thought FS Gaming has had contact with the Shaked family, which still owns 20% of the shares.
A move to install Alexander and Morana would be independent of any – rumored to be imminent – appointment by the 888 board of a new CEO.
Check the record, check the guy’s track record: FS Gaming emerged last week as a 6.6% shareholder at 888, including a 2% stake owned by former Entain CEO and now DAZN boss Shay Segev. In a filing, the group said Feldman, Alexander and Morana were shareholders alongside B Riley’s Daniel Shribman.
Last week it was suggested the group might see 888 as a turnaround opportunity and look to launch a full bid for the company.
But, given the state of the debt markets, a source with knowledge of the thinking at FS suggested its aims could be achieved by different means.
888 is “rudderless”, the source suggested, pointing to the absence of a permanent CEO since Itai Pazner resigned in January and the delayed – but now imminent once more – departure of CFO Yariv Dafna.
It is currently being led by executive chair Lord Mendelsohn.
Behind the eight ball: The company is widely viewed as having underperformed since its merger with William Hill, weighed down by £1.73bn of net debt. With pro-forma EBITDA in 2022 of £311m, the company is highly leveraged at 5.6x.
Financing cost the company £111m last year, including £75m of interest expense on the debt used to buy William Hill.
During a November investor day, the company admitted that 64% of its debt was subject to floating rates.
It is not known if or how FS Gaming would re-engineer the debt. 888 itself recently sold its Latvian business for £25m.
Despite the 40% share price boost in the past week, on a one-year view the shares are still off by nearly 48%.
😱 Horror show: market loses faith in 888
Midnight express: An Alexander appointment would be controversial given the nature of his departure from Entain, one week before the company announced it was under investigation by HMRC with regard to its activities in Turkey from 2011-17.
Speaking on condition of anonymity, the source said the judicial process was ongoing and “doesn’t affect” FS Gaming’s plans.
Entain recently updated on the case, saying it was in negotiations with regard to a deferred prosecution agreement with the authorities and would likely face a “substantial” fine.
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The week ahead
Events, dear boy, events: The Canadian Gaming Summit starts on Tuesday this week in Toronto, with the Fantasy Sports & Gaming Association Summer Conference taking place in Cleveland kicking off today, Monday.
Also later today (Monday), Compliance+More launches the latest in its monthly editions, the Token Word. Call it Zeitgeist-y, perhaps, but this debut edition follows in the wake of the news last week regarding the SEC investigations of Coinbase and Binance.
Also, developers want to see an end to the flood of memecoins, the UK introduces “game-changing” crypto rules and is crypto gambling?
Calendar
Jun 12-13: FSGA Summer Conference, Cleveland
June 13-15: Canadian Gaming Summit, Toronto
Binary bet
BetMGM’s future has become “somewhat binary”, says Deutsche Bank.
Binary option: Following a meeting with management, DB analysts said while BetMGM has been very successful, notably in “healthily profitable” iCasino, the JV structure with Entain “needs to be reconciled”, which is “something both sides continue to contemplate”.
The likeliest solution, they suggested, was that MGM buys out its 50% JV partner – and licenses the tech – rather than the other way around.
But the “cleanest solution” would be a full acquisition of Entain.
“We struggle to see a scenario in which the 50/50 JV exists in its current form over a longer-term horizon,” the team added.
Primary colors: The analysts noted that near-term profitability at BetMGM was likely not a “primary focus” for management and played second fiddle to growth.
Ahead of the next football season, BetMGM hopes to have single-game parlays and a single-wallet solution in place and will scale down marketing and promos.
In Las Vegas, the “steady and optimistic” picture is clouded by “challenging YoY comparisons” in Q2.
In Macau, management “remains optimistic” about achieving ~$1bn of EBITDAR in 2024.
Analyst takes
IGT: Monetizing the gaming and digital businesses via a sale – or sales – is the “logical step” for IGT given the continued valuation weakness, suggested Truist. IGT’s current multiple of 6.2x est. 2024 EBITDA lags its gaming and lottery peers. “It makes sense for the potential RemainCo to be lottery-focused,” the team added.
The team noted Light & Wonder achieved “sizable benefits” from the sale of its lottery and digital arms but that multiples have “come down meaningfully since”.
US OSB: Roth MKM said the narrative for OSB and iGaming has “180'd in the past six months” with investors bullish on profitability. But the team noted that since Q422 handle has stagnated in states older than one year while promo intensity has been maintained.
In addition, few additional states are legalizing through YE2024.
YTD figures to the end of April show industry OSB GGR at +79% YoY and iGaming +22%, but, excluding states that launched in LTM, OSB handle is averaging just 2% YoY growth since Oct22.
Massachusetts and Ohio state launches “were much larger than anticipated, but they have also matured more quickly and are no longer growing MoM”, the team added.
UK online: Looking at the latest data from the UK Gambling Commission in light of recent earnings estimates from the top end of the market, the team at Regulus suggested there has been a shift to the long tail of iCasino operators from the market leaders caused by a greater degree of RG implementation at the top end.
The team continues to believe that 2023 will likely be a “relatively strong year” but not for the top of the market.
Unlike in the 20 years of market growth to 2017, “a rising tide no longer raises all ships”.
GLP: The decision over whether Major League Baseball comes to Las Vegas hangs in the balance with the special session of the state legislature, but the analysts at JMP suggested that even if approval isn’t granted a redevelopment of the Tropicana remains on the table.
The gaming investment REIT “sits in the driver's seat” to be the principal source of funding for site owner Bally’s. “This opportunity could be fast-tracked should the A’s relocation be refuted,” they added.
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Startup focus – First Pitch line-up
Flex Fantasy, Turnover Global and Linemate are the three companies that will be putting their best foot forward as part of the First Pitch competition at the Canadian Gaming Summit this week.
Flexible friends: New York-based Flex Fantasy, run by founder Joel Cettina, is a DFS provider that, according to Crunchbase, raised $750k in March this year from 716 Venture Partners.
The platform allows players to use their season-long teams to compete in ‘daily style’ challenges.
The numbers games: Turnover Global is a Toronto-based firm founded in 2019 by Brett Proud that provides the algorithms for virtual sports, which it says align perfectly with each sports’ historical outcomes.
The company says its sport-specific gameplay engines can run limitless outcomes, enabling each platform or sportsbook partner the ability to have bet content exclusivity.
Data feed: Montreal-based Linemate was dreamt up by Matthew and Calvin Konya as a consumer-facing sports analytics offering that breaks down complicated stats into easily digestible formats.
Linemate is part of Sportradar's Acceleradar startup program.
Judges include Benjie Cherniak from Avenue H; Dani Lipkin, managing director, global innovation sector at TMX; Scott Secord, partner at Cardinal Capital Sports; Emily McIlquham, investment analyst at Relay Ventures; and Mohit Kansal, managing director of Clairvest.
Growth company news
Who could ask for anything more? Boston-based AI-driven sports-betting technology startup Rithim has closed a $2m Seed round led by Boston Seed Capital, Counterview Capital, Oyster Ventures, Correlation Ventures, Service Provider Capital and Permit Ventures.
The company said it is using AI to help demystify sports data analytics for a consumer audience.
Career paths
Gregg Winiarski is Fanatics’ new chief legal officer two years after joining the company in an advisory role.
Jackpocket has appointed Kelly Gillease as a senior advisor to its board of directors. Gillease was previously chief marketing officer for NerdWallet.
The UK-based betting platform provider Playbook Engineering has appointed Ivo Doroteia as CEO.
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Newslines
Affiliate provider Acroud has announced a restructuring of its sports and media businesses alongside new agreements over earnouts related to its Voonix and Acroud Media purchases. The company’s shareholders have also agreed to an injection of SEK22m ($2m)-worth of new shares to provide additional liquidity.
Georgia-based skill games operator Lucky Bucks has entered Chapter 11 bankruptcy proceedings with the support of 86% of its debtholders. The company said the move would “strengthen” its finances.
Tiidal Gaming has announced the completion of the sale of Sportsflare to Entain for C$13m.
Crown Melbourne will receive significant cash from new owner Blackstone to go towards renovations, according to The Australian.
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