Sep 19: Esports Entertainment hits rights issue button
The week in shares – Esports Entertainment, Wynn New York, Startup focus – StatsDrone, New Jersey – August +More
Good morning. In today’s edition:
A rights issue puts the skids under the Esports Entertainment share price.
Wynn Resorts sets its sights on a Manhattan project.
Our startup for this week is StatsDrone.
The week in shares
Esports Entertainment shares plummet on news of a rights issue.
Dilute: Esports Entertainment, the somewhat confusingly named betting and gaming operator, saw its share take a 46% tumble on Friday after the company announced the pricing of a public offering to raise $7.5m before costs. The proceeds from the sale will go towards general working capital as well as repaying a portion of its outstanding senior convertible note.
The company has also issued warrants for the purchase of further stock.
The offer is expected to close later today, Monday.
🚨 Esports Entertainment shares suffer a bad day on Friday
Exit through the gift shop: Esports Entertainment issued a profit warning in May when it said it had failed to monetize its esports tournament assets and was taking a $38.6m impairment charge.
In April the company launched its VIE.gg esports-betting offering in New Jersey.
Hard to figure: The company’s revenues come from iCasino operations such as the Lucky Dino as well as traditional sports-betting including BetHard and SportsNation.
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Disney OSB comments
Disney CEO walks back comments about “building” an ESPN sportsbook.
Reverse ferret: In an interview with CNBC last Friday, Disney CEO Bob Chapek gave some further definition to what the company was planning for ESPN when it comes to sports-betting. Instead of being in the process of building a sportsbook, it appears it is still pursuing a third-party partnership.
“We at ESPN have the ability to do that. Now we’re going to need a partner to do that, because we’re never going to be a book, that’s never in the cards for the Walt Disney Company,” Chapek said.
“But at the same time, to be able to partner with a well-respected third party can do that for us.”
Ratings for Week 1 of the NFL were ahead of last season.
Off to a flier: Viewing figures for the first week’s slate of games averaged 18.5m across the seven broadcast windows. The League said that between Thursday and Monday 121m people watched at least a few minutes of NFL broadcasts.
Monday Night Football brought in 19.8m viewers – the biggest audience since 2009 – across ABC, ESPN, ESPN2 and ESPN Deportes.
Wynn New York
Wynn is planning a casino for Hudson Yards in Manhattan, according to reports.
Hard yards: The New York Times reported this weekend that Wynn Resorts has teamed up with developer Related Companies, the firm behind the Hudson Yards development to build a casino in Midtown. The property would be situated next to the Javits Center and is the first New York casino project to be announced.
The report suggests that in order for the Related/Wynn proposal to proceed it would have to win approval from a yet-to-be-formed six-person community advisory committee.
State senator Brad Hoylman, who represents the district that includes Hudson Yards, told the paper that Relate/Wynn had a “steep hill to climb to convince local residents that a casino in Hudson Yards is in their best interests”.
King of Queens: According to the Times, New York Mets owner Steven Cohen has also been in talks with Hard Rock to develop a casino near Citi Field, the team’s stadium.
A spokesperson for Mayor Eric Adams told the Times that the New York State Gaming Commission will decide on where these casinos will be located. “But we are hoping two of the three downstate casinos will be placed in New York City.”
Double Down analyst update
The social casino developer gets a positive rating despite recent share falls.
Tough act to follow: DDI revenues in Q2 were down 13.5% to $80.5m and adj. EBITDA was down 16% to $26m, but Macquarie said this was down to tough comps against the pandemic-affected prior-year period, the removal of Apple’s Identifier for Advertisers (IDFA) feature last year, which made user acquisition more expensive, and the wider market pullback.
Wind break: Macquarie said short-term headwinds would persist, but forecast a return to growth in early 2023.
Thirtysomething: However the analysts added that DDI’s FY revenues are now well above pre-pandemic levels, at more than $300m, with EBITDA margins over 30% despite paying 30% fees to third-party app stores.
Brass in pocket: Further upside should come from diversification into casual gaming, which Macquarie noted has a TAM of c$28bn. Meanwhile, a pro forma net cash balance of ~$100m gives it a “mandate for M&A”.
Churchill Downs Inc acquires Ellis Park racetrack
Churchill Downs has signed a definitive agreement to acquire the Ellis Park racetrack for a total cash consideration of $79m.
Extension build: As part of the agreement, Churchill Downs said it would also invest c$75m to build an extension facility at the Towne Square Mall in Owensboro, KY.
The new venue will include 600 historical racing machines (HRMs), betting outlets and a broadcasting center. The Ellis Park venue currently includes 300 HRMs.
B2B openings: The news comes on the back of CDI terminating its OSB and iCasino ventures in February to focus on its horse-racing activities. The group said it would do so in the consumer and B2B spaces and recently announced a partnership to supply horse racing pari mutuel betting to FanDuel.
Startup Focus – StatsDrone
Who, what, where and when: The Montreal-based business was founded in 2017 by John Wright, CEO, and Darrell Helyar, COO, on the premise of bringing data science and BI to the world of affiliates and affiliate programs.
Funding backgrounder: StatsDrone started a funding round process in March with the target of raising $400k, with an announcement due soon. The company already has a VC called NetSolid Investments on board.
The pitch: “Affiliate marketing on the surface isn't changing but there are people working to make some changes in the tech side as well as bringing new ideas to the table,” says Wright.
“Aside from AI, we believe the big changes that are coming and needed are introducing better data visualization in every dashboard you see, business intelligence and data analytics.”
Wright suggests the best market in iGaming will be in non-English-speaking territories where some have struggled to scale.
“Some of our ad-tools will make this job a lot easier and also help new affiliates break into these markets where tech, design and data have been something of a resource they haven't had before.”
What will success look like? Wright says the medium-term goals would be to launch a series of stand-alone products with a target for revenues of $5m+ in the next 1-2 years.
“Exit would either be acquired or we will operate the company for many more years and continue to grow with the aim to be a leader in the affiliate software space.”
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Analysts in brief
Kindred: Following on from the company’s Capital Markets Days last week, the team at Deutsche Bank suggests the positive messaging around the re-entry into the Netherlands could make the company more attractive as a target. However, it noted that the 2025 £1.6bn revenue target was ambitious.
The week ahead
Tuesday: Look out for our coverage of the Gaming in Germany conference and preview of the SBC Summit Barcelona in tomorrow’s newsletter. Coverage from Barcelona will be featured on Thursday and Friday.
Note: The E+M podcast is taking a pause for two weeks.
New Jersey: Sports-betting GGR in August was up 25.5% YoY to $65.3m on handle that fell 17.7% YoY to $546.8m. Deutsche Bank said the drop in handle for the fourth consecutive month “could be due to a combination of the scaling back of promotions and the impact of New York launching mobile”.
Casino GGR for August was up 4.4% YoY at $274m, while online casino GGR was up 16.1% YoY but down 3.9% MoM to $131.4m.
Leaders: Wells Fargo said BetMGM led iCasino market share with 32%, DraftKings was second with 18% and FanDuel third with 14%.
Combined leaders: In terms of combined iCasino/OSB, Wells Fargo estimated FanDuel and BetMGM led with 25% each, while DraftKings was third with 19%.
Louisiana: GGR in August increased 14.8% YoY to $179.4m on a neutral calendar. Sports-betting handle was $128.3m with GGR coming in at $9.7m. Wells Fargo said Aug-Sep21 GGR was adversely impacted by Hurricane Ida, while Deutsche Bank said August visitation levels were up 18.4% but spend per visitor was down 3% YoY.
Massachusetts Aug22: Casino GGR was down 0.4% YoY to $92m on a neutral calendar. Wynn Encore saw GGR rise 0.4% to $59.6m, Penn Entertainment’s Plainridge Park was down 6.1% to $12m, GGR at MGM Springfield was up 0.9% to $22m.
Delaware Aug22: Online casino GGR increased 37.2% to $1.3m YoY, sports-betting GGR came in at $354.4K, a 439.7% YoY rise but 7.5% MoM decrease. Handle was down 40.8% YoY but up 7.4% MoM to $2.9m.
FanDuel was once again the top dog, according to Jefferies’ Digital Gaming Brand Matrix, which showed it was winning in MAUs, web-traffic duration and overall sports-betting score. In August, DraftKings was again second and BetMGM third.
Fifth Street Gaming is planning to rebrand the Lucky Club Casino in North Las Vegas into a Latino-focused casino in partnership with the sports-bar chain Ojos Locos Sports Cantina, according to the Las Vegas Review-Journal.
MGM Resorts’ acquisition of LeoVegas is expected to conclude this week after the group’s $604m offer was approved by 98.07% of LeoVegas shareholders.
Mohegan Digital has launched its Fallsview Casino-branded OSB and iCasino website in the province of Ontario. The group has partnered with Kambi for its online sportsbook and with companies such as Pala Interactive and Intellitics for its online casino and affiliate activities.
What we’re listening to
The All-In podcast of the evolution of the influencer: “The most important M&A deal of 2022 was when Penn Entertainment bought Barstool Sports. It shows that every consumer services business ultimately needs to be a content business.”
What we’re reading
Sorry, not sorry: Erika Nardini, Barstool’s “steady business brain”.
Sean Sherman’s modern Indigenous kitchen profiled in The New Yorker. “And, obviously, everybody then was super into ‘Kitchen Confidential’,” Sherman said. “All the line cooks suddenly wanted to be drunken pirates.”
Sep 19-20: Gaming in Germany
Sep 21-22: SBC Summit Barcelona
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