Going to the mat

Penn to face a fight over board nominees

Jan 17, 2025

Activist investor clears the path for a boardroom battle.
Evoke says it is seeing the green shoots of recovery.
Genius Sports taps investors for more cash.
The online opportunity is “too big to ignore,” says Jefferies.

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A heavyweight clash

🍿Activist investor HG Vora has cleared the way for it to challenge Penn’s board nominees this summer after it trimmed its holdings to ensure it did not have to obtain licenses from every jurisdiction in which Penn has a presence.

This means war: In a filing lodged with the SEC this week, HG Vora said it had reduced its voting rights to less than 5% but maintained its economic interest.

Recall, early last year the activist revealed it had a 18.5% stake in Penn, including cash-settled swaps and options.
It said at the time it had a shortlist of “highly qualified directors” that it wished to see installed on the board, but it is believed its approach was ignored by the company.

According to the SEC filing, HG Vora had obtained regulatory clearance from 24 out of 25 states for it to move ahead with putting forward its director nominations before Penn’s submission deadline of February 4.

However, the notice went on to say that the holdout – believed to be Massachusetts – said it could not give clearance within that timeline.
Hence, it reduced its holding in the company to 4.8%, below the limit at which gaming regulators get involved.

Another fine mess: Penn has nine board members of which three will be up for election this year. If Penn keeps to the same schedule as the past few years, it will mean a vote will take place at its AGM in June.

Before that, it is thought HG Vora will be able to solicit support from other shareholders.
This lobbying will start in March and April when Penn files its proxy statement.
Sources suggested HG Vora remains convinced of its case that the current board and management team has messed up the online gambling opportunity and wasted $4bn in pursuit of its plans.

This includes the failed Barstool Sportsbook venture and now the faltering efforts with ESPN Bet.

High hopes: In a sectorwide note this week, the team at Truist noted that Penn’s share price was affected in December when it looked like HG Vora would not be able to get the regulatory clearance for its campaign.

The analysts remain convinced of the long-term potential of the ESPN partnership, saying that following recent meetings they had “higher confidence” in the potential.

Confidence trick: The optimism comes despite the signal failure of ESPN to gain any OSB headway after the relaunch ahead of the NFL season, the launch in New York in September and the linking of ESPN Bet and the mothership ESPN in October.

Penn’s next online hope is the launch of the Hollywood standalone iCasino app, which officially went live in Pennsylvania this week.

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Money raise

Gimme all your money: Sports data and marketing services provider Genius Sports has announced an offering of new shares that it hopes will pull in ~$144m of new cash, which may – or may not – be used for potential M&A.

The offering will involve the participation of current investors Caledonia and Wellington Management, alongside other existing shareholders as well as new investors.
The new shares will be priced at $8.50 per share, which represents a discount to the prevailing price of over $9 before the announcement.
The shares fell over 5% on the news to end on Wednesday at $8.72.

Cashing in: At the same time, Genius also issued a brief trading update reaffirming its 2024 guidance for revenue of ~$511m and adj. EBITDA of ~$86m.

The company also reported a net cash position ahead of the new injection of $135m, up from $69m in September and $126m better off than at the close of 2023.
It said this equates to a positive net cash position for 2024 as previously disclosed as part of its guidance.
The analysts at JMP said that combined with the share sale proceeds it would leave the company with pro forma cash of ~$279m.

Sending a signal: Joel Simkins, CEO and founder at XST Capital, said the share sale was “both intriguing and a positive indicator for the B2B supplier sector.”

He said it suggested overall sentiment is “improving” and hinted that M&A, especially tuck-ins and smaller-scale transactions, “could be heating up.”
The team at JMP said that, historically, Genius has bought businesses in the areas of personalized marketing content technology, AI tracking/analytics and free-to-play games.
They added that the company “understands” the importance of proving ahead of any transaction that “without a doubt” the current trajectory for cash flow isn’t “impeded.”

Green shoots

The big mo: The operator of William Hill and 888, Evoke, said it saw double-digit growth in Q4, meaning H2 revenues will come in at the higher end of the previous 5-9% estimates.

Group revenue was up ~12-13% YoY in the last three months of the year with the company saying it saw “continued improvement” in its core markets with online growth of ~16-17%.
H2 growth is now expected to come in at 8% while EBITDA is now guided to come in at the top end of expectations of between £300m and £310m for the full year.

Giving off sparks: “This turnaround is all supported by a clear market strategy,” said CEO Per Widerström, who spoke in the release about “significantly improved underlying momentum.”

Evoke will report its 2024 results in March.

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Give us a break: Bally’s is lobbying for a 12-year property tax break for its $1.7bn Chicago casino development and has put forward a proposal to reduce the applicable rate from 25% to 10%.

The company is arguing that the tax cut is essential for the financial viability of the project and that the city will receive more revenues in the long run.

MGM Resorts is to spend $300m on renovations at its MGM Grand property in Las Vegas.

Remains of the Cray: Entain is to close the Crayford dog track after the last day’s racing on January 19. The remaining racing schedule will be transferred to the Romford, Hove and Monmore tracks.

By the numbers: New Jersey’s iCasino operators continued to steamroller all before them in December, with revenue rising over 26% YoY to $228m while B&M gaming was flat at $232m. Sports-betting GGR was down 43% at $62.8m.

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The big move: Betsson has restructured its executive team, making Jesper Svensson operational CEO and with Kristian Saliba becoming operational CFO.

Svensson joined Betsson’s Malta division in 2013 while Saliba has been with the company for 17 years.
Additionally, Triin Toomemets-Krasnitski was promoted to chief legal officer from VP of legal.

High Roller Technologies has appointed Kristofer Muscat as its new COO. Brian Dean is the new chief people officer at Kambi. SIS has appointed experienced iGaming executive Harry Heynes in the newly created role of head of new business.

WA.Technology, said Dave Hickey has been promoted to the role of commercial director. Digitain has promoted Aida Vardanyan to CEO of Digitain Malta, while Yggdrasil has promoted Jose Simon Kadala to the role of CCO.

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Analyst takes – sector overviews

Not getting over it: As per the aforementioned note from the analysts at Truist, investor expectations are judged to be at a low point due to subpar performances in the backend of 2024 both for B&M-led stocks and for the online contenders.

But the team added that easing comps will allay concerns this year, while more M&A will contribute towards the “right-sizing” of valuations.
This assumes, however, that bid/ask spreads narrow and that the rate environment is supportive. Neither of those are a given.

Can we fix it? The analysts believe the uncertainties caused by the hold issues with OSB since October could “flip from bad to good,” unless, that is, the betting on NFL model is “completely broken.”

Alright Nostradamus: Writing ahead of the news from Maryland, Truist warned that “rising state budget deficits will remain a talking point.”

This is the one

In it together: The “unprecedented” OSB volatility in Q4 notwithstanding, the long-term opportunity is simply “hard to ignore,” argued the team at Jefferies, who have upgraded their TAM estimate for 2030 to $50bn from $37.5bn.

The team made the point that, as it stands, online gambling is a sub-sector which is “not subject to economic cycles or interest rates,” given its nascent state and the lack of debt among the constituent companies.

Generation Alpha: They added that in their view the evolving cash generation is “critical” to their long-term prognosis.

Specifically, the conversion of EBITDA to free cash flow is “considerably higher” than with other sectors. They pointed to the 50% conversion at Sportradar and the 90% at DraftKings.
“As a consequence, the cash pile-up in 2026 presents a discussion of allocation, including buy-backs,” the team added.

Connections

The big deal: The PGA Tour and FanDuel have announced a multi-year extension to their official betting partner content and marketing relationship.

Under the terms of the new agreement, which is extended through to 2027, FanDuel will become the official odds provider on the PGA Tour’s app and website.
Additionally, FanDuel for the first time will work to enhance the storytelling of select broadcasts through live odds integrations.

Altenar has received a five-year B2B supplier license from Denmark’s Gambling Authority. Meanwhile, Yggdrasil will continue to distribute its online games in Denmark after receiving an updated gaming license.

Games Global has launched operations in Brazil and Peru. Octoplay’s games are now live with Rank’s Mecca and Grosvenor Casinos brands in the UK. Booming Games’ iGaming portfolio is now accessible on the ChopBet platform in Africa. EveryMatrix’s iCasino content is now available on BetMGM and Rush Street Interactive’s offerings in West Virginia.

Sector watch – Forkast

A band of merry men: Esports tournament platform Community Gaming has announced the launch of Forkast – described as a ‘prediction market platform designed for gamers.’

Forkast is the latest event betting and prediction market platform to launch following Robinhood’s recent sports event trading move (see prior E+M here)
It will be launched in partnership with Ronin, an Ethereum-based blockchain specifically targeted at the video gaming community.

What the Friar Tuck? Community Gaming provides the infrastructure for those wishing to host online tournaments. The site provides tournament brackets, automated payments, dedicated match rooms, an administrative hub and live leaderboards.

The launch of Forkast is to coincide with the drop of the $CGX token. The white paper suggested the token’s functionality will be primarily for ‘staking and governance’
Staking will allow users to unlock loot boxes (that can contain fungible tokens, items from partnered games and platform credit), the ability to vote on and create new prediction markets, access to decentralized tournaments and participation in future ecosystem governance.

Leveraging the Community: Community Gaming hopes to capitalise on the 750,000+ gamers it has ‘onboarded’ to provide the liquidity for its prediction markets, which will focus on popular gaming and streaming culture.

Examples of potential prediction markets provided in the white paper range from the release date of Grand Theft Auto 6 through to highest stream viewership by X date of notable influencers.
Predictions for esports tournaments are also highlighted prominently, with each selection under a heading subsequently providing a ‘yes’ or ‘no’ outcome priced between $0.01 to $1.00, which users can purchase units of before eventual settlement.

A regulatory awakening? There has been no detail surrounding how the platform will adhere to regulation. Platforms such as Kalshi and Robinhood operate under the supervision of the Commodity Futures Trading Commission in the US, whereas betting and prediction products often fall under localised gambling legislation.

Currently, there is no suggestion that Community Gaming will be seeking CFTC permission, nor liaising with any gambling regulator.
Given the company’s primary product is facilitating gaming tournaments – the emergence of futures markets at the fingertips of a younger audience may well cause a stir should it gain the desired traction.

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Earnings calendar

Jan 22: Las Vegas Sands
Jan 23: PointsBet
Jan 29: BlueBet
Jan 30: Evolution, Rank
Jan 31: Red Rock Resorts

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