Welcome to latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.
SECTOR NEWS: Las Vegas Sands (LVS) is shifting its strategy and has had discussions with potential partners for online sports betting, Christopher Palmeri of Bloomberg reports, citing people familiar with the situation. Robert Goldstein, acting CEO with Sheldon Adelson on medical leave, is in the early stages of talks, but plans could involve using the Sands brands or the broader development of a betting platform by the company, sources told Bloomberg. Adelson has opposed creating a sports betting platform based on moral grounds in the past, believing online games such as virtual slot machines make it too easy for patrons to lose money, Palmeri points out.
Earlier this week, MGM Resorts (MGM) said it is aware of the announcement by Entain (GMVHF), its partner in the U.S. sports betting and iGaming market, regarding a possible offer by the company for the entire issued and to be issued share capital of Entain. The company confirmed that it has proposed an offer of 0.6 MGM shares for each Entain share, which, based on closing prices on December 31, 2020, represents a value of 1,383 pence per Entain share and a premium of 22% to Entain's share price. Under the terms of the proposal, Entain shareholders would own approximately 41.5% of the combined company. However, the board of Entain stated that the proposal undervalued Entain but has also asked the company to provide additional information in respect of the strategic rationale for a combination of the two companies. Today, MGM confirmed that, it has received a non-binding letter of intent from InterActiveCorp (IAC), with interest in 59,033,902 MGM shares, setting out its support of the proposed transaction. IAC considers the strategic rationale for MGM's proposed combination with Entain to be "compelling" as a "combination would position the combined company as a pure play omni-channel global leader in gaming and entertainment," the company stated in a market notice to the London Stock Exchange. Following that announcement, Goldman Sachs analyst Stephen Grambling maintained a Sell rating and $23 price target on MGM Resorts, but said that InterActiveCorp's "willingness to invest additional capital could help mitigate potential incremental leverage in a transaction" The analyst, who sees the news as "positive" for MGM, is looking for further announcements to get more clarity on a potential deal.
NEW YORK WARMS UP: New York Governor Andrew Cuomo has seemingly warmed to legalizing online sports betting amid budget shortfalls due to the impact of the COVID-19 pandemic. Cuomo said in a statement, " "New York has the potential to be the largest sports wagering market in the United States, and by legalizing online sports betting we aim to keep millions of dollars in tax revenue here at home, which will only strengthen our ability to rebuild from the COVID-19 crisis." This week the New York Daily News reported Cuomo will make the mobile sports wagering measure a central part of his policy proposals to be laid out in next week's State of the State address in an effort to to lessen the financial impacts of COVID-19 . Oppenheimer analyst Jed Kelly told investors in a research note that a live New York offers two immediate industry catalysts:
- NY would be the most populous state with legalized OSB and he estimates the first full year industry revenue opportunity at $400-500M; and
- He expects neighboring states to follow, providing the majority of the Northeast Megalopolis with access to mobile sports betting by late 2021.
The analyst sees this enabling DraftKings (DKNG) to execute a national advertising strategy around sports betting that would provide advantages in customer acquisition efficiencies relative to competitors. He noted Flutter Entertainment's (PDYPY) Fanduel is the only other competitor that could mimic a similar strategy.
Needham analyst Brad Erickson also sees potential New York legalization of online sports betting as a boon to DraftKings. He noted the company's approximate 30% market share in New Jersey could play well in the Empire State. One observation Erickson made was that Cuomo's comments addressed strictly online sports betting. The analyst told investors with New York having meaningful brick and mortar casino business, particularly upstate, the politics and associated job disruption from iGaming probably make that too controversial of a topic for Cuomo to broach at least for the time being.
While the justification for legalization of sports betting in New York have been noted, there are potential hurdles in passing such a bill that is seen as controversial to some. Ryan Butler of The Action Network reported the New York State Gaming Commission would, under Cuomo’s plan, issue requests for proposals to select and license a sport betting operator. Butler said, "Also, if tailored narrowly to only the four upstate commercial casinos and not the state’s hybrid casino-horse track “racinos,” the statements appears it would only allow one mobile operator, and only FanDuel, DraftKings, BetRivers and IGT allowed to bid for that license." While a number of political obstacles remain, one scenario in which an amendment to the state constitution would be required, could see New Yorkers having to wait until 2023 to see legal sports betting.
Matthew Waters of Legal Sports Report reported Sen. Joe Addabbo and Assemblyman Gary Pretlow released their 2021 New York online sports betting bill Thursday evening, but it looked very similar to the previous attempt. On the other hand, this bill called for two skins per licensee instead of one each. Currently, four commercial casinos and three tribes that run casinos in New York could offer online sports betting. However, Waters noted that tax revenue could fall well short of what Cuomo expects from a lottery-style monopoly in this bill. Their bill suggested conservatively $79M in annual revenue to the state, but there is doubt that amount would satifsy Governor Cuomo.
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI), Scientific Games (SGMS) William Hill (WIMHY) and Wynn Resorts (WYNN).
