Quackers
Genius Sports CEO offers defense of Legend buyout
Stung by share price fall, CEO letter seeks to quell investor concerns.
In +More: Former Kindred CEO Nils Andén departs FDJ United.
Novig raise values the P2P sports prediction operator at half-a-billion.
Earnings: FDJ United ‘absorbs’ the European-wide tax hits.
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If you’re explaining...
If it looks like a duck: Genius Sports CEO Mark Locke took the extraordinary step of publishing a letter to defend the company’s acquisition of affiliate Legend for $1.2bn, arguing that investors had got the wrong impression of the deal.
Locke suggested the market reaction to the deal was “divided,” although a 30% share price slump on the day rather suggests unanimity.
In response to Wednesday’s pronouncement the shares gained nearly 9%, but that still leaves them adrift by 43% YTD.
If it walks like a duck: In the letter he argued that investors have serially failed to understand the nature of his company’s “transformative deals,” noting the widespread skepticism when Genius signed official data rights agreements, including the NFL, and when it acquired Second Spectrum.
“In each case, our thesis was rooted in structural change rather than short-term convention,” he added.
“Over time, execution clarified what the strategy already anticipated. This acquisition follows the same pattern.”
If it quacks like a duck: He addressed the specific investor worries over paying $1.2bn for what is essentially an affiliate business. “Some people think we bought a simple affiliate business,” he said.
“Our view is different. We bought a participation layer built on two decades of technological investment that sits between official data infrastructure and the moment of transaction.”
Yet the business he went on to describe – involving the websites Covers.com, Casino.org and Casino Guru – is indeed an affiliate business.
It’s a duck: In announcing the deal last week, Genius didn’t use the word ‘affiliate’ and in the letter Locke moved to answer this omission, but said that any use of the word with regard to Legend was “reductive.”
“The term has been applied as shorthand, without distinguishing between low-quality traffic brokers and technology platforms built on owned audiences and behavioral intelligence,” he wrote.
Mere semantics: In contending that Legend is a technology-driven “participation layer” sitting between official sports data and the point of transaction, Locke drew an analogy with Booking.com.
The revenue model may be commission-based, but the value lies in owning the audience and data, he argued.
He further contended that AI strengthens rather than threatens the model.
Defying logic: Following the issuance of the letter, Stifel said that channel checks suggest there is broad agreement with Genius’ "industrial logic" in attributing a premium to the value of Legend's purpose-built machine-learning engine for sports-betting and iCasino content.
The team added that it was thought Legend should prove more resilient to generative AI disruption than traditional affiliates.
But the degree of resilience was debated.
Pigs might fly: Sources spoken to by E+M, all on condition of anonymity, were also far from convinced that Locke could succeed in redefining the acquisition in the terms he laid out in his letter.
“To state the obvious, it’s an affiliate,” said one industry consultant.
“You can’t put lipstick on a pig,” said another industry source with extensive experience in the affiliate space.
Doth protest too much: At heart, the issue isn’t about what Legend is but rather that it has been bought on what remains a very high multiple. Locke said he considers the ~6x pre-earnout EBITDA multiple as fair. But that multiple is pre-earnout. As per the analysts when the deal was announced, that rises to 8.5x when the earnout is included.
This is against a backdrop of muted activity in the affiliate space where multiples have been range-bound between 3.5x and 5x.
As the analysts at UBS suggested when the deal was announced, what Genius is actually buying is timeline progression – it’s buying in revenues to ensure it achieves its growth targets.
“Peel back the strategic narrative and this looks more like a revenue acquisition than a capability acquisition,” said another industry source.
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+More
Arkansas opening: DraftKings and FanDuel appear set to launch in Arkansas, with the partially closed market likely to allow in the bigger operators, according to local media. Citizens said it was their belief the state regulators are looking to capitalize on bringing in more established online platforms given the underperformance.
Kambi has signed a multiyear deal with ComeOn to supply its Odds Feed+ solution to the operator’s proprietary sportsbook. The partnership gives ComeOn access to Kambi’s actively managed odds, including Abios-powered esports, supported by €17bn of liquidity, AI-driven pricing and low-latency official data.
Data points
New Jersey: iCasino GGR rose 17% YoY in January to $259m while OSB GGR fell 5% to $112m on handle that was down nearly 10%. B&M casinos was up 1.6% to $213m.
Pennsylvania: Handle was also down 10% in January, but hold of over 12% meant GGR rose 12% YoY to $91.8m and falling promo spend - down 26% YoY - saw NGR soar 37.5% to $67.6m. iCasino GGR of $249.3m was up 18.6% YoY.
Read across
Turf war: In a video posted on X on Tuesday with all the aesthetics of a hostage video, CFTC chair Michael Selig issued a direct challenge to the various states that have instigated legal proceedings against multiple prediction market providers, saying “we will see you in court.” From yesterday’s Compliance+More.
Slippery customer: Meanwhile, in Tuesday’s C+M, we detailed the masterclass in regulatory evasion displayed by Selig when he sat down last week with Bloomberg’s Odd Lots podcast.
+More careers
FDJ United has announced the departure of Nils Andén, the former CEO of Kindred, who has been replaced as the head of the company’s online unit by CFO Pascal Chaffard. A new CFO is being sought. Meanwhile, Ed Ware, former founder at 32Red – which was sold to Kindred – has been appointed as a non-executive director at Lottomart.
Cliff Baty will join Rank as interim CFO from February 23 and take a seat on the executive committee. Iain Hutchinson, ex-Genius Sports, has been appointed SVP for business development at Huddle. Immense, formerly Videoslots, has appointed Joonas Karhu as MD of Finland. UK-listed Gana Media has announced that Lorenzo Caci has joined as a member of its advisory board.
Predictions
Mission creep: Novig has raised $75m in a Series B funding round led by Pantera Capital – which values the firm at $500m – to help with, as founder Jacob Fortinsky put it, its “mission to democratize and financialize sports markets.”
Novig was originally a P2P betting exchange that aimed to launch into regulated markets, in particular Colorado.
The company raised $6m in seed funding back in August 2023 ahead of that market entry.
If at first you don’t succeed: However, after failing to gain traction via the state-by-state route, in September 2024 the company pivoted to a sweepstakes model.
After a period of substantial growth, Novig announced a Series A funding round in August last year, raising $18m from a group of investors led by Forerunner Ventures.
The company then applied for designated contract maker status from the CFTC as it finally pivoted to prediction markets.
Cut out the middleman: Pantera Capital and others on the cap table, including Multicoin Capital, Makers Fund and Edge Equity, are notable names from the crypto VC space, and Fortinsky said his firm chose to partner with the “best crypto venture firms in the world to further accelerate our plans to make Novig the most efficient and liquid sports prediction market in the world.”
“Others are using prediction market technology to financialize new markets with unproven demand,” he added. “We leverage it to fix broken markets where demand already exists.”
Paul Veradittakit, managing partner at Pantera Capital, said Novig was “proving” prediction markets can “fundamentally reshape sports betting by removing the exploitative middleman.”
P2P, he added, delivers better odds, fairer market structure, and “alignment between platform success and user profitability.”
“When 23% of users are profitable compared to 2% on traditional platforms, it’s clear this is a foundational change to the industry,” he added.
Pred hot: Meanwhile, also coming out of the crypto space, a new prediction market operator called Pred has raised $2.5m from a funding round led by Accel with participation from Coinbase Ventures’ BEF fund and Reverie.
Pred said it is building a sports prediction exchange on Base, Coinbase’s layer-2 blockchain network.
On Borod time: Lastly, Ari Borod, previously chief business officer at Fanatics, announced via LinkedIn that he has joined Polymarket as president of sports business development.
However, Front Office Sports reported Fanatics initially sued to prevent Polymarket from poaching Borod but eventually settled.
The magazine suggested there was an irony in Fanatics going the legal route after it was itself sued by DraftKings over the hire of Michael Hermalyn away from the company.
FOS also suggested that Fanatics’ founder Michael Rubin and Betting & Gaming CEO Matt King are personally invested in Kalshi.
Further predictions reading: A new research paper from the Federal Reserve finds Kalshi markets “provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers.”
Octoplay is now live in Michigan with BetMGM, FanDuel, Fanatics, and Rush Street Interactive - the largest coordinated market entry in our history to date.
Earnings PRO
FDJ United: While FDJ United delivered FY25 recurring EBITDA of €902m, meeting its guidance, it did so by absorbing more than €50m in gaming tax increases across France, the Netherlands and Romania. See yesterday’s Earnings Extra edition (PRO subs only).
Kambi: The provider insists the real story from 2025 is the inflection and has put forward guidance for 2026 of €20m-€25m for adj. EBITA, which would represent a material step up. For the first time in several quarters, the direction of travel is clearly positive. See Wednesday’s Earnings Extra edition.
Earnings in brief
Aristocrat Leisure: In its AGM statement, the company said it delivered FY25 revenue of A$6.3bn (US$4.4bn), up 11%, with EBITDA margins expanding from 40.1% to 41.7%. Net profit before amortization rose 12% to A$1.6bn.
Aristocrat Gaming grew revenue 9%, Product Madness grew social casino revenues 5% against a market declining 9%, and Interactive revenues surged 71% and profits by 87%.
For FY26, the company expects another positive year weighted to the second half. Gaming operations are targeting 4,000-5,000 net unit additions.
Content revenue growth in Interactive is tracking below aspirations, but the company reiterated its FY29 US$1bn Interactive revenue target.
Aristocrat said the legal settlement with Light & Wonder would yield A$45m in cost recovery.
Raketech: The troubled affiliate provider saw revenue decline 45% YoY to €5.7m while adj. EBITDA of €1.1m was down 38% due to the phased exit of paid operations. A bright spot was the Nordic affiliation assets, which improved following a positive Google update.
Puts+Takes
IG Group
Close to the hedge: In a recent reiteration, Deutsche Bank took a philosophical tone with the retail financial trading firm. suggesting the company isn’t just riding the wave of market volatility but can actually be a hedge against an increasingly volatile world.
The analysts framed IG as “a diversifier against market/macro sensitive names elsewhere in the sector.”
In a world where “ongoing volatility” and more regular shocks appear to be becoming an ongoing feature, IG could be “well placed to capture windfall trading profits in such scenarios,” the team said.
Hash tag: DB sees IG’s stakes in Zero Hash and Payward/Kraken as an interesting wrinkle. IG holds 8.1% of Zero Hash (carried at £60m from a $1bn round) and 0.34% of Payward/Kraken (£50m from a $20bn round).
The analysts noted Zero Hash is now fundraising at $1.5bn, which would imply meaningful upside to the carrying value.
Yet both stakes “contribute nil to IG’s stated surplus capital,” a conservative treatment that creates a valuation buffer the market may be overlooking.
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Upcoming earnings
Feb 23: Super Group (earnings)
Feb 24: Super Group (call), Gentoo, Brightstar Lottery, Light & Wonder
Feb 25: Better Collective, Churchill Downs, VICI (earnings), GiG Software, Tabcorp
Feb 26: Better Collective Churchill Downs, VICI (call), Flutter, Penn, Cirsa, Codere Online
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