Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.
SECTOR NEWS: Credit Suisse analyst Kenneth Fong sees "light at the end of the tunnel" for the Macau gaming sector with risk/reward profiles becoming more favorable. This is due to "less-than-feared" regulations, as discussions with industry participants offer insights that the government's proposed gaming law may be less stringent than expected, Fong told investors in a research note on Wednesday night. In addition, the analyst believes the expected Hong Kong quarantine-free border reopening with Macau will "provide meaningful upside" for current gaming revenue forecasts. Pent-up demand from Hong Kong and travelling Chinese is likely to generate 40%-50% incremental revenue for Macau's current gross gaming revenue, Fong estimates. The analyst upgraded Sands China (SCHYY), SJM Holdings (SJMHY), Wynn Macau (WYNMF), Galaxy Entertainment (GXYEF), Melco Resorts & Entertainment (MLCO), Melco International (MDEVF) and MGM China (MCHVF) to Outperform. He also upgraded Studio City (MSC) to Neutral from Underperform. Fong's top pick is Sands China.
Genius Sports (GENI) announced a new agreement with FanDuel Group (PDYPY) to provide a range of official NFL data, content, media products and trading services. In April 2021, FanDuel was selected as one of the NFL's official sports betting partners.
Barstool founder Dave Portnoy tweeted earlier this week: "Barstool Sportsbook Now Live in West Virginia". Penn National (PENN) currently operates online Barstool Sportsbooks across several U.S. states. Portnoy's tweet followed Penn's announcement that it expects to open Hollywood Casino Morgantown to the public on Wednesday, December 22 at noon, pending final regulatory approvals. The Morgantown Category 4 casino represents Penn National's fourth facility in Pennsylvania, the company noted.
Accel Entertainment (ACEL) announced that the company's board of directors has approved a share repurchase program of up to $200M of shares of common stock. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.
Churchill Downs (CHDN) recently announced that the company has signed an agreement to sell 115.7 acres of land near Calder Casino for $291M. Churchill Downs has agreed to sell the land to Link Logistics, an owner of logistics real estate assets, established in 2019 by Blackstone (BX). The closing of the sale of the property is subject to the satisfaction of various closing conditions. The company anticipates closing the sale of the property in the first half of 2022. Churchill Downs is planning to use certain proceeds of the sale to purchase or invest in replacement property "that qualifies as an Internal Revenue Code Section1031 transaction." Following the closing of the transaction, Churchill Downs will retain ownership of approximately 54 acres of the current 170-acre parcel of land on which the company's wholly-owned wholly-owned Calder Casino sits
GENIUS EARNINGS: Genius Sports reported Q3 earnings on Tuesday. The company beat expectations on revenue, but fell short of expectation on EPS. Additionally, Genius raises its FY21 revenue outlook. The company said, "Genius increased its full-year 2021 revenue projections and now expects to generate approximately $257 to $262 million (previously $255 to $260 million). The company also revised its adjusted EBITDA forecast to be broadly breakeven (previously $10 to $20 million), reflecting strategic reinvestment of near-term earnings to fund organic and inorganic growth initiatives supporting long-term sustainability and scale. Genius management believes the positioning of the business over time will rely on the investments made in this early stage of the Company's growth cycle, which may present attractive opportunities with sustainable long-term returns. These anticipated investments include various technology developments, data and streaming rights, the expansion of U.S. operational infrastructure, as well as other potential opportunities to help solidify the company's competitive advantages, while supporting a stabilized Adj. EBITDA margin of 40% at scale." Shares were down as much as 23% in the wake of the Q3 report.
Benchmark analyst Mike Hickey lowered the firm's price target on Genius Sports to $20 from $33 and maintained a Buy rating on the shares after the company reported better than consensus Q3 revenue while reporting AEBITDA essentially in-line with consensus. Genius raised FY21 revenue guidance, but cut its AEBITDA expectation to breakeven to $5M, noted Hickey. Reduced profit assumptions raise concerns over potential sports rights fee escalation and reduced profit from the NFL deal, said the analyst, who is cautious on growth from online sports betting and anticipates a greater portion of forward revenue growth will come from the company's media and ad technology segment. Of note, Cathie Wood's ARK Investment bought 684.8K shares of Genius Sports on Wednesday
NOT SO FAST: Judge Dabney L. Friedrich in the District of Columbia invalidated the Seminole gaming compact in Florida, ruling late Monday that the compact violates federal Indian gaming law, Mary Ellen Klas of the Tampa Bay Times reported. Consequently, all sports betting and gaming expansion in Florida has been halted indefinitely. The judge shut down Florida's attempt to claim that sports betting was happening on Indian lands by having all bets going through a server on tribal property. Morgan Stanley analyst Thomas Allen noted that while he expects appeals, if the pact remains invalidated, online sports betting will have to be legalized in Florida through a state-wide referendum, which Allen notes is something that DraftKings (DKNG) and FanDuel have been pursuing for the November 2022 elections. He would expect that the Seminoles most likely try to bring forward another ballot initiative that would give them more exclusivity, though Allen adds that "multiple ballot initiatives often lead to confusion and rejection." While the tossing out of the original compact is expected to significantly delay sports betting in Florida, bets are still being placed. According to Klas, the Seminole tribe has continued to operate its online betting app throughout the week. As of Wednesday the denial had not changed that. Despite, a spokesperson for the tribe not being available for comment, bets were still being processed through the app early Thursday morning. On Tuesday, the tribe filed a notice of appeal and a “motion for stay pending appeal,” that would allow it to continue operating amidst the appeals process. In a statement filed with the court, Marcellus Osceola, chairman of the tribe, noted that the tribe has already contributed two $37.5M revenue-sharing payments to the state under the compact, hired employees and spent over $25M to develop the online sports book.
SLOW AND STEADY: As of Wednesday, online sports betting is legal in New York. However, the one small problem is that no legal mobile books are live to accept bets. Matthew Waters of Legal Sports report noted, Wednesday marked the publication of the rules for mobile New York sportsbooks in the state register. Which means any of the nine temporarily licensed operators could have went live if they had everything ready. Next betting servers must be put into the four commercial casinos to oblige the the definition of casino gaming. Senator Joe Addabbo Jr. confirmed to LSR he requested the New York State Gaming Commission set a unilateral start date for the market, which is a slightly different tune the senator has sung previously. Addabbo notably detested the fact that neighboring New jersey was taking revenue from New York. While a race to launch would mean quicker revenue to the state, Addabbo argues an agreed upon start date would be better for constituents. He told LSR, “It would just be better for the consumer of New York, really, and the industry if we all got a single start date. Now if an operator is unable to meet that start date set by the gaming commission that’d be unfortunate for them. But it would be fair and also better for the consumer instead of a haphazard who can start, who can’t start.” Ultimately, the start date will be up to the New York State Gaming Commission, but the senator is bullish on being live before NFL playoffs kickoff on January 15. “So while the start date today might be premature, I believe we’re inching ever so closer to that start date. As I understand it, my opinion, the negotiations and the progress for the servers has been ongoing and going well. So I think we’re OK. … I jokingly said if we wanted to do a mobile bet by tomorrow, we could, that’s how experienced they are. So I am so confident it will be soon," Addabbo remarked.
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI), Scientific Games (SGMS), Score Media (SCR) and Wynn Resorts (WYNN).
