The General Directorate and Regulation of Gambling (DGOJ, for its Spanish acronym) reports that gross gaming revenue (GGR) for the first quarter of the year was €304.9 million (US$332.22 million). This represents an increase of 50.9% compared to the same period last year.

That number also represents a drop of 2.7% against the results of the last quarter of 2022. This isn’t a large surprise, as Q4 is often a slower time of the year because of the approaching holidays.

Double-Digit Growth

The total GGR includes €130.6 million (US$142.3 million) in online sports betting, a year-on-year jump of 42.8%. Online casino gaming added 47.02%, closing at €143.3 million (US$156.13 million). Bingo and poker also saw growth, adding 1.1% and 8.97% in their respective GGRs.

Poker’s improvement came from an increase of 5.01% in activity compared to the previous quarter, and 24.92% compared to the same quarter of the previous year. In contrast to Q4 of last year, tournament poker increased by 8.42%, while cash games decreased by 2.72%.

In spite of the year-on-year improvement, the betting segment showed a decrease compared to the previous quarter. It lost 7.65%, but retail sports betting did, as well. That segment receded by 11.21%

Online bets on horse races were down, losing 5.92%. However, wagers on “other” sports were up 37.7%. The DGOJ didn’t break down what that segment included.

In the casino segment, there was growth of 0.64% compared to the fourth quarter of 2022, and a year-on-year variation of 29.2%. This annual growth occurred mostly in slot machines, with 31.3%, and in live roulette, with 32.2%.

Deposits and withdrawals by players increased from a year ago by 22.7% and 15.68%, respectively. With respect to the previous quarter, deposits decreased by 0.31% and withdrawals increased by 0.78%.

Regulatory Reforms Aren’t Hindering Growth

Spain has been introducing a number of reforms to its gambling industry over the past several years, including greater restrictions on marketing and sponsorships. Using the latest figures as a guide, two years after many changes were made, it’s obvious that the reforms aren’t hindering growth.

Marketing spend in the quarter was €93.3 million (US$101.66 million), broken down into affiliate spending at €11.8 million (US$12.85 million), sponsorships at €1.22 million (US$133 million), promotions €50.2 million (US$54.7 million) and advertising €30.03 million (US$33.01 million). Compared to the previous quarter, this expense decreased by 13.08%, and it also represents a dip of 0.81% from a year earlier.

Advertising presented a drop with respect to the quarter and the previous year of 22.8% and 12.75%, respectively. Affiliate spending decreased by 19.9% from the prior quarter, and increased by 32.45% from the first quarter of last year.

The monthly average of active game accounts is 1,158,628, which implies a decrease of 2.57% compared to the previous quarter and an annual increase of 11.06%. The monthly average of new accounts is 111,390 users, with a quarterly decrease of 15.78% and an annual drop of 2.68%.

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That means the largest landlord on the Las Vegas Strip carries the lowest possible investment-grade credit rating. Fitch noted that an upgrade to that mark is possible if the real estate investment trust (REIT) can sustain a net debt/earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio below 4.5x, if it diversifies its tenant base and if VICI and its rivals show the ability to easily tap capital markets if needed.

VICI’s client roster includes Apollo Global Management, Century Casinos, and Hard Rock International, among others, confirming the gaming REIT is diverse across regions and casino sizes. Fitch notes MGM and Caesars combine for 76% of VICI’s adjusted revenue.

VICI’s Favorable Fundamentals

At a time of elevated stress in some corners of the commercial real estate market, namely office space, VICI stands tall in the broader real estate sector. Strong rent collections and an ability to thrive in inflationary environments are among the factors underpinning the REIT’s investment thesis.

Positively, the company has stable occupancy and rent collections with CPI-linked escalators, though overall gaming REITs have weaker contingent liquidity compared with more traditional CRE property types, which is a drag on the rating,” according to Fitch. “The ratings also contemplate Fitch’s expectation of deleveraging below 5.5x by YE 2024; if deleveraging is delayed as a result of operational issues or capital allocation, the ratings or Outlook may be revised.”

Because of a spate of deal-making over the past couple of years that significantly expanded the REIT’s client and property rosters, VICI’s leverage is running toward the higher end of the historical range. Fitch believes the company can drive that figure down to 5x to 5.5x by the end of 2024.

“Deleveraging will result from a combination of annual contractual increases in rental income (all fixed, but includes potential upside from CPI-linked escalators) and whether retained cash flow post-merger is directed toward acquisitions,” added the ratings agency.

VICI Could Be Longer-Term Candidate

Better credit ratings are imperative for any company, because the higher an issuer’s grade is, the more it saves in interest payments when it sells corporate debt.

Ratings agencies, such as Fitch, typically don’t take corporate downgrades or upgrades lightly. But VICI is a credible candidate for a credit grade boost over the long haul. The ongoing desirability of Las Vegas and regional casino real estate is one reason why.

“Positively, non-traditional owners have increasingly been purchasing Las Vegas real estate (e.g. private equity), which has led to cap rate compression and is a longer-term positive as it relates to the attractiveness of Las Vegas gaming real estate,” concluded Fitch. “Regional gaming outperformed many of the other hard-hit sectors during the pandemic, which should also be a longer-term positive as it relates to the attractiveness of regional gaming real estate.”

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That’s 50% higher than the suitor’s original bid, and $40 million more than DraftKings (NASDAQ: DKNG) recently offered. PointsBet shareholders are scheduled to vote on the deal Friday.

DraftKings was unable to finalise a binding offer by 6 p.m. (Melbourne time) Tuesday 27 June 2023, and accordingly, the Board has determined that the FBG Transaction, as improved by the above-stated amendment, is superior in terms of both pricing and certainty of being able to complete on a timely basis,” according to a statement issued by PointsBet.

The Melbourne-based company said its board continues to unanimously recommend to investors that they approve a transaction with Fanatics. Earlier Tuesday, PointsBet requested that the Australia Securities Exchange (ASX) halt trading in its stock pending a major news announcement.

Fanatics, PointsBet US Moving Forward

PointsBet noted that privately held Fanatics returned to the bargaining table on Monday with its increased bid. The $225 million offer is broken into two parts — $175 million in cash at initial completion of the transaction, and the remaining $50 million when the acquisition is finalized. With the higher bid, PointsBet will distribute more cash to investors.

“The Proposed Distribution of capital is expected to be made over two tranches, with each tranche following shortly after each completion payment. The Company will commence the necessary process to facilitate the Proposed Distribution in the coming months, with the first tranche of approximately A$1.00 per share expected to be paid mid-September 2023,” according to the seller.

Fanatics’ potential acquisition of PointsBet US would rapidly boost the number of states in which the operator offers mobile sports betting. Importantly, PointsBet US has a New York license, which is an attractive attribute because that’s the largest state by sports betting handle, the fourth-largest by population, and won’t be issuing new sports wagering permits anytime soon.

DraftKings Lost, but May Have Won

PointsBet noted that DraftKings never made a binding offer for its US operations, and while the Boston-based company missed out on this deal, it may have won another battle simply by forcing Fanatics to increase its offer.

Such a strategy is common in mergers and acquisitions across all industries. In this case, the speculation may have merit, because nearly two years ago, DraftKings and Fanatics almost merged. But Fanatics CEO Michael Rubin pulled the plug late in the negotiations.

DraftKings didn’t speak directly to that point. But the above may be more than conjecture, because the company didn’t need PointsBet US for licensing or market share purposes.

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The Russell 2000 is one of the world’s most widely followed small-cap indexes. Small-cap stocks are generally defined as those with market values of $250 million to $2 billion. Super Group fits that bill, as it closed Tuesday with a market capitalization of $1.41 billion.

We are excited to join the Russell 2000 Index,“ said Super Group CEO Neal Menash in a statement. “We believe that this milestone as a public company will enhance our profile with investors as we work towards optimizing our global footprint in the online sports betting and gaming industries while maintaining our profitability.”

As a result of its addition to the Russell 2000, Super Group stock was also added to the broader Russell 3000 Index. The sportsbook operator didn’t say if it’s also being included in the Russell 2000 Growth or Value gauges.

 Stock Waiting on Russell 2000 Benefits

In many cases, stocks rally on news of inclusion into widely followed indexes, because active managers and passive funds that follow those benchmarks need to buy the newly added equities.

Super Group is more than a year removed from its debut as a public firm following a merger with a special purpose acquisition company (SPAC). With shares of so many deSPACed companies faltering, including several in the gaming industry, Super Group hasn’t been immune to that trend. The stock has shed more than 36% over the past 12 months.

Investors punished the stock as the company struggled to gain adequate market share in the fiercely competitive US sports wagering arena.

Wall Street Mixed on Super Group Stock

Currently, four analysts cover Super Group, with one rating it a “buy” and the other three calling it a “hold.” There’s more enthusiasm on the price target side, as the consensus forecast is $5, or 74.22% above Tuesday’s closing. But that could be a symptom of analysts being late to cut that forecast as the stock slumps.

Super Group isn’t richly valued. But some analysts aren’t overly enthusiastic about the company’s near-term growth prospects, indicating a lofty multiple may not be warranted. The firm also controls iGaming entity Spin.

“The group is licensed in multiple jurisdictions, with leading positions in key markets throughout Europe, the Americas, and Africa,” according to the statement.

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That forecast is courtesy of Morgan Stanley analysts Praveen Choudhary, Gareth Leung, and Stephen Grambling, and represents a 46% uptick from the EBITDA levels seen in the special administrative region (SAR) in the first three months of 2023.

Spending per visitor is tracking 50% above 2019 level. Further upside to mass revenue could come from recovery in package tours, visitation from provinces further away from Macau and improving capacity for ferry and air travel,” noted the analysts in a recent report to clients.

In what’s become an increasingly mentioned theme, the Morgan Stanley analysts highlighted summer concerts at various Macau integrated resorts as catalysts for improved EBITDA and gross gaming revenue (GGR).

MGM China Best Idea

The six Macau concessionaires are Galaxy Entertainment, Melco Resorts & Entertainment (NASDAQ: MLCO), MGM China, Sands China, SJM Holdings, and Wynn Macau.

“We expect [MGM’s] 2024 mass-market share at 13% and 2Q could be tracking at 14% to 15% (16% in 1Q),” wrote Choudhary, Leung, and Grambling. “This means [estimated] 2024 mass revenue to be at least 30% above 2019, even if we assume no growth in industry mass revenue vs 2019.”

The analysts added their 2024 EBITDA estimate for MGM China is 30% above the operator’s 2019 mark, while consensus is just 10% above pre-pandemic levels, indicating the operator may not be getting the credit it deserves for its earnings resurgence.

“We forecast industry mass revenue to reach 115% and 125% of 2019 level in 2024 and 2025, respectively,” observed the analysts.

Melco, Wynn Have Potential Upside, Too

Melco and Wynn Macau are among the concessionaires that could deliver second-quarter earnings surprises, because those operators brought new amenities online during the June quarter.

Increased availability of hotel rooms could drive upside to third- and fourth-quarter EBITDA and GGR forecasts, according to the bank.

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A market announcement with the Australia Securities Exchange (ASX) confirmed the halt, noting it could be lifted on Wednesday, should the gaming company deliver a news release.

The securities of PointsBet Holdings Limited (‘PBH’) will be placed in trading halt at the request of PBH, pending it releasing an announcement. Unless ASX decides otherwise, the securities will remain in trading halt until the earlier of the commencement of normal trading on Wednesday, 28 June 2023 or when the announcement is released to the market,” according to a regulatory document.

In a letter to Dale Wang, ASX adviser for listings compliance, PointsBet General Counsel Andrew Hensher requested the trading halt. PointsBet’s US-listed shares, which trade over the counter, were also halted on Tuesday.

PointsBet Could Announce Sale News

To be clear, PointsBet did not reveal the topic of the upcoming news announcement. But Hensher wrote in the letter that the trading halt was requested “to enable it to manage its continuous disclosure obligations in relation to a material transaction.”

This month, the company’s US unit has been a hotbed of acquisition speculation, as Fanatics launched a $150 million all-cash bid for that segment. That was later topped by a $195 million all-cash offer from DraftKings (NASDAQ: DKNG).

Less than 10 days ago, PointsBet confirmed it will engage in discussions with DraftKings. But it told investors that it continued recommending they vote in favor of the Fanatics proposal because the DraftKings bid is not binding as of yet.

Other Possibilities for PointsBet

For now, it’s just speculation. But the upcoming news release from PointsBet could pertain to a variety of factors. It’s possible that another suitor — not DraftKings or Fanatics — has entered the fray. Not out of the realm of possibility is the point that PointsBet could announce the sale of its Australian business or another segment, though that hasn’t been confirmed.

There are rumors of bad blood between DraftKings CEO Jason Robins and Fanatics CEO Michael Rubin. How deep that animosity runs and how willing the two are to engage in a full-fledged bidding war for PointsBet US remains to be seen. Clarity could arrive on Wednesday.

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The latest funding round in the microbetting company was led by Roger Ehrenberg via IA Sports Ventures and Eberg Capital, and Fuel Venture Capital. With a $10 million contribution in the A2 round, Fuel Venture boosted its investments-to-date in Betr to $20 million.

Both co-founders — Joey Levy via a personal investment and Jake Paul via Anti Fund — participated in the round, and other major existing investors including FinSight Ventures, Florida Funders, and Aliya Capital Partners have invested significantly beyond their pro rata,” according to a statement issued by the Miami-based company.

Founded in 2022, Betr operates across two primary divisions, Betr Gaming and Betr Media. The company is operational in Massachusetts and Ohio, and is licensed to offer microbetting in Virginia. It plans to launch in that state at an as yet to be determined date. The company also has market access in Indiana.

Betr Funding Confirms Appetite for Betting Investments

Over the past several years, some smaller companies have encountered bumps and bruises in the domestic sports wagering space, but Betr’s latest funding round and freshly elevated valuation confirms investor interest in the industry remains robust.

That style of wagering is popular in markets outside the US, namely Europe, where slower-paced sports are popular with bettors. In the US, sports such as basketball, hockey and, to a lesser extent, football, aren’t conducive to in-game betting. However, baseball and golf, among others, are suited for it.

Betr Gaming began with a microbetting-only product, allowing users to bet on individual plays and events – such as pass or rush on the next play in football or the outcome of the next pitch in baseball, and is expanding its product offering to include additional markets with full sportsbook capabilities,” according to the statement.

Betr says it plans to introduce two new gaming verticals in the weeks ahead. The company is the first and only in the industry to have banned credit cards as a form of deposit, and sets monthly deposit limits for clients in the 21 to 25 age group.

Betr Media Could Be Alluring to Investors, Too

Like other sports betting companies, Betr has a media operation. Analysts expect that in the years ahead, tie-ups between media and wagering media firms will increase, potentially bolstering revenue on both sides.

“Betr Media is the fastest growing sports betting media brand in the United States, already surpassing 1.3B impressions on social media in its first 10 months,” concluded the operator. “Betr Media is focused predominantly on original and short-form content, which the Company believes will be the primary form of sports media consumption for the 21-34-year-old male demographic outside of consuming live sporting events themselves.”

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Unidentified sources told Bloomberg Monday that Blackstone is mulling options, including a potential partial sale of Bellagio, but no decisions have been made. That report follows two April articles by Casino.org indicating the Strip venue could be on the block, as the Blackstone Real Estate Income Trust (BREIT) looked to raise cash amid redemption requests.

BREIT acquired the property assets of Bellagio from MGM Resorts International (NYSE: MGM) in November 2019 for $4.25 billion, and proceeded to lease back the venue to the casino operator.

Heightened chatter about a Bellagio transaction arrived on the same day Blackstone said it’s selling $3.1 billion worth of industrial warehouses and related properties to Prologis. That transaction is expected to close by the end of this month.

Blackstone Partial Casino Land Ownership

In commercial real estate, it’s not uncommon for some venues to have multiple owners, and that methodology has been employed by BREIT on the Las Vegas Strip.

That $4.27 billion transaction included a cash consideration of $1.27 billion and the assumption of $3 billion in BREIT debt.

Blackstone has a history of success in monetizing Las Vegas property holdings. When it sold Cosmopolitan nearly two years ago, it did so for $5.65 billion, meaning it roughly tripled its initial investment while creating one of the most lucrative commercial real estate transactions in US history. Should the private equity firm divest 50% of Bellagio’s real estate this year, it will almost certainly fetch a price in excess of half of $4.25 billion.

Who Could Be Interested in Bellagio Stake?

Already the largest landlord on the Strip, VICI makes for a logical potential suitor for part of Bellagio, particularly because it’s previously done business with BREIT. However, the real estate investment trust (REIT) hasn’t publicly said it would be interested in owning part of the MGM venue.

Likewise, another private equity firm could kick the tires on the property. But it’s not clear if Blackstone would sell a stake in a lucrative property to a rival.

While enthusiasm is likely to be high for a partial interest in Bellagio, interested buyers may encounter issues procuring financing to make a deal happen due to weakness in the US commercial real estate market.

“Commercial real estate assets are facing multiple challenges against the backdrop of higher interest rates and reduced appetite for bank lending into the space,” according to a recent PwC report. “The increased cost of debt is forcing dealmakers to take more time upfront to assess the right debt/equity mix to finance transactions and has elongated negotiations as buyers and sellers slowly align on valuation expectations.”

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In a new report to clients, Stifel analyst Jeffrey Stantial reiterates a “buy” rating on IGT, while lifting his price target on the stock to $38 from $32. That implies upside of 25% from the June 23 close. It’s possible that IGT could merge, sell, or spin-off those businesses. The company noted it could also retain those segments and increase related investment. However, analysts view sales or spin-offs as the most likely outcomes.

Our most salient takeaways from this analysis include: 1) there is a larger set of addressable buyers than intuition would suggest, 2) Global Gaming margin expansion potential & positioning for the hyper-growth iCasino content opportunity make IGT an attractive target for both financial & strategic buyers,” noted Stantial.

Should IGT ultimately divest its global gaming and PlayDigital operations, the new company would be a standalone lottery entity, one likely to “re-rate higher,” added Stantial.

For IGT, Good Time to Consider Spin-Offs

In November 2021, IGT revealed it would consider a spin-off of its iGaming and sports wagering unit. But related action was limited until this month.

“We highlight the still recent transition in leadership, with current CEO, Vince Sadusky, bringing new perspective to the business, much of which is informed by his experience outside the gaming industry,” added Stantial. “Similarly, we expect former CEO Marco Sala brought fresh perspective to IGT’s largest shareholder after transitioning to CEO of De Agostini (note De Agostini currently holds ~62% voting power).”

Should the company part with the global gaming and PlayDigital units, it’s possible that its lottery business, which accounts for 75% of pro-forma earnings, will finally get the respect it deserves from investors.

IGT Global Gaming Unit Could Attract Variety of Suitors

While IGT hasn’t formally declared whether the aforementioned segments will be sold or spun off, there could be momentum to sell the global gaming unit. That’s because that business is improving, and could attract a variety of suitors armed with compelling offers.

“IGT’s market-leading share for VLTs and bartops has also proven stickier than feared following competitive launches,” concluded Stantial. “Certainly competition in the N.A. slot market is as intense as ever with strong product from most major suppliers, though it seems evident IGT has at minimum stabilized market share following ~1.5 decades of bleed, arguably even showing some reasons to be optimistic on further share gains over the next several years.”

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A recent Form 4 filing with the Securities and Exchange Commission (SEC) confirms Reeg bought 7,500 shares of Caesars stock earlier this month. The purchase occurred on June 14 at an average price of $49.93 for a total transaction price of $370,725. The stock closed at $45.21 on Friday after slumping 10% on the week.

Reeg became chief executive officer of the largest domestic casino operator by number of properties in July 2020, when Eldorado Resorts, the company he previously led, acquired the Harrah’s operator, creating “new Caesars.”

Reeg Has Caesars Trending in Right Direction

Reeg took the helm at Caesars during a tumultuous time. The coronavirus pandemic not only stifled the gaming industry, but cast doubt on whether or not Eldorado and Caesars would make it to the merger altar.

Since the deal was sealed and Reeg took the lead at the new company, Caesars’ stock is higher by approximately 36%. It’s also a favorite among Wall Street analysts at a time when the operator’s Las Vegas Strip and regional casinos are performing admirably.

Trends both in Vegas and in Regionals for the most part remain healthy and the company is not seeing any material signs that their customer base is weakening,” wrote Stifel analyst Steven Wieczynski in a note on Caesars out earlier this month. “We believe current trading levels have already incorporated a significant slowdown in consumer trends.”

Wieczynski rates the stock a “buy” with a $68 price target, implying upside of 51.9% from the June 23 close.

Reeg Driving Deleveraging, iGaming Profitability

Among the reasons Wall Street is enthusiastic about Reeg and the Caesars management team are debt reduction efforts and Caesars Digital’s flirtation with profitability, which could arrive later this year. That unit includes internet casinos and Caesars Sportsbook.

It’s possible that by 2025, Caesars will have driven leverage down to the 3x range while generating $5 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA). As Wieczynski notes, that could imply a per-share free cash flow of $12.

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The New York Post reported Friday that in early 2021, DraftKings and Fanatics were in advanced discussions regarding a merger of equals that would have led to a $48 billion deal valuing each firm at $24 billion. Unidentified sources told the Post that Fanatics founder, Chairman and CEO Michael Rubin scrapped the transaction at the 11^th hour.

The exact time line of the merger discussions wasn’t mentioned in the article. But “early 2021” implies DraftKings and Fanatics were talking marriage just months after the former became a standalone publicly traded company, and as DraftKings stock was surging. The shares hit an all-time intraday of $74.38 in March 2021.

Today, Fanatics is valued at $31 billion in private markets, while DraftKings sported a market capitalization of $11.71 billion at the close of US markets on June 23.

PointsBet Could Be Epicenter of Robins, Rubin Rift

Given the above data points, it can be argued that Rubin was right to call off the merger, and that DraftKings would have benefited from the transaction.

While PointsBet continues to recommend to investors that they vote in favor of the original offer, the Australian company confirmed it will hold talks with DraftKings, and that the new suitor has until June 30 to make a binding offer.

Boston-based DraftKings controls approximately 30% of the US online sports wagering market, and it’s operational in all the same states as PointsBet. That could be a sign that buying PointsBet US is a luxury, not a necessity.

Last Sunday, PointsBet said it will demand a “hell or high water” agreement from DraftKings, meaning the prospective buyer most go through with the acquisition even if some state regulators balk at it. Sources told the Post the Federal Trade Commission (FTC) could get involved and potentially rule in favor of Fanatics under the auspices of not allowing DraftKings to hinder a smaller rival’s growth ambitions.

DraftKings, Fanatics Chirping at Each Other

Following DraftKings revealing its offer for PointsBet US, Rubin said the bid is nothing more than a move to prevent Fanatics from concluding the deal. He also questioned why DraftKings is paying so much attention to Fanatics Betting & Gaming (FBG), which currently is an upstart, bit player on the US sports betting landscape.

DraftKings hasn’t said that it’s purposefully trying to block Fanatics. But the latter is hoping to offer mobile sports wagering in at least a dozen states by the start of football season. Buying PointsBet US would help with that goal.

It’s also possible, as noted by the Post, that DraftKings wants to keep Fanatics out of New York. PointsBet has a license there, and the state has no plans to issue more sports wagering permits. While New York’s sports betting taxes are the highest in the nation, operators deal with it because there’s little chance California, Texas, or Florida will approve mobile wagering anytime soon.

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In a new report to clients, Roth MKM analyst Edward Engel said Macau’s GGR report for the sixth month of the year could potentially be a bullish surprise as a recent uptick in coronavirus cases in China wanes. That’s not a stretch when considering concessionaires generated $1.93 billion in May GGR despite some COVID-19 headwinds.

As China’s latest COVID wave continues to fade, we believe June GGR can surprise to the upside as Macau’s rebound continues through June and into July/August’s peak summer travel season,” wrote Engel.

The official June GGR report will be delivered on July 1. Engel believes it will show a 5% month-over-month increase thanks to recent liberalization of visa issuance. Residents of mainland China must obtain a government-issued visa to enter Macau.

Why Macau June GGR is Important

Macau’s monthly GGR reports are among the most widely watched data points in the global gaming industry, but the June update could be particularly noteworthy because it could provide analysts with a sense of how things are shaping for July and August, which are typically two of the busiest months of the year for Macau travel.

Sands is already one of the leading performers among casino operator equities this year, and Engel isn’t alone in the belief that stock could notch more upside in the second half of 2023. Nearly 74% of the analysts that cover the stock have the equivalent of a “buy” rating on it, believing it offers potential upside of 22% relative to the consensus price target.

City of Dreams operator Melco Resorts & Entertainment (NASDAQ: MLCO) is another Macau name gaining favor among analysts.

We like MLCO’s quality non-gaming assets, proven by its recent successful launch of non-gaming events, which should offer the most positive earnings surprise in 2Q23,” wrote Credit Suisse analyst Kenneth Fong in a note earlier this week. “This should also benefit the company from a mass-driven recovery ahead, while the sustainability of the ability in attracting new players remains to be seen.”

Fong highlighted Macau’s summer travel season, second-quarter earnings, and the possibility of China deploying monetary stimulus as potential catalysts for shares of Melco.

Another Macau Name to Monitor

MGM Resorts International (NYSE: MGM) is another Macau operator Wall Street is constructive on. The company owns 56% of MGM China, which controls two integrated resorts in Macau.

Since the start of the year, the MGM Cotai operator has been one of the best-performing large-cap travel and leisure equities, but there could be more upside in store. Sixty-one percent of the analysts covering the name rate it “buy” or better, and the stock resides at about 33% below the consensus price target.

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In a Thursday filing to Malaysian securities regulators, the gaming company revealed the buyer, SmartCity Miami, pulled out of the deal after Genting declined to grant the company an extension of the exclusivity period and alterations to the terms of sale.

Genting Malaysia has seen the value of its investment in Miami increase approximately 400% in just over a decade and firmly believes in the sustained strength and growth of the Miami market,” said the casino giant in the regulatory filing.

Genting put the land on the market last November after abandoning hopes of ultimately building a casino resort there. The Malaysian company also owns the Hilton Miami Downtown Hotel and the adjacent Omni Center.

Commercial Real Estate Woes May Have Hindered Genting Sale

Gaming real estate stands as an exception, but the current state of the US commercial property market is fragile, a situation exacerbated by the spate of regional bank failures seen this year.

“While we still await clarity from management on the exact reason for the failed sale, one factor that we think which could have affected the outcome was the sharp deterioration in the commercial real estate market in the US over the past few months, and banks’ reluctance to finance large transactions, especially after the bank failures seen recently,” wrote Nomura analysts Tushar Mohata and Alpa Aggarwal of the Genting Miami deal

Genting noted in the regulatory document that SmartCity Miami is still interested in the land and that it will evaluate other opportunities to sell the property. The Asia-Pacific casino giant openly said it is seeking bids of $1 billion or more. By late March, it reportedly had five such offers.

Blow to Genting’s Debt Reduction, New York Plans

Had the deal with Smart City reached the finish line, Genting would have realized a $966 million profit on the Biscayne Bay land and $743 million in after-tax profit.

Those proceeds would have been directed to debt-reducing efforts and to prepare for enhancements to Resorts World New York, assuming the operator is chosen for one of the three yet-to-be-awarded downstate gaming permits there.

“The sale, had it gone through, would have generated a large windfall for the company … and would have helped repair the balance sheet of both Genting Malaysia and parentco Genting Bhd by significantly lowering net debt to equity,” added the Nomura analysts.

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This past February, during the presentation of the 2023-24 budget by Finance Secretary Paul Chan at the Legislative Assembly, the topic of the new tax became part of the discussion. The goal is to replenish the Hong Kong government’s treasury at the expense of the HKJC, even as the club tried to convince the government not to move forward with its plans.

The organization’s new tax obligation will come from its soccer betting earnings, according to a government statement. The rate could have been higher, with lawmakers deciding that heightened competition in the betting space could subdue the HKJC’s earnings.

Betting Success Means More Taxes

Christopher Hui, Hong Kong’s financial secretary, stated that the club will have to continue to support community charities. In other words, the club can’t try to reduce its contributions to counter the newly imposed HK$2.4-billion (US$306.48 million) per-year tax.

Vincent Cheng, representing the Democratic Alliance for the Betterment and Progress of Hong Kong, acknowledged that the decision to consider the reduction of financial support was due to unique circumstances. He also acknowledged that the club’s charitable donations have been instrumental in promoting sports and culture in the region.

Following Chan’s budget speech, the HKJC requested the government refrain from implementing the betting tax. This is because its current tax rate for horse racing already stands at an unprecedented 72%-75%.

The HKJC cautioned that the imposition of such a tax would bring about far-reaching complications. The club warned that it could lead to a disruption in its thriving business model and provide an illegal advantage to gamblers.

New Taxes Coming to Hong Kong Sports

The HKJC’s assertion isn’t universally accepted, according to Regina Ip, the current president of the New People’s Union party. She dismissed the sum the club will have to add to its tax bill, arguing that compared to the HK$10.9 billion (US$1.39 billion) it earned in the 2020-21 financial year, it wasn’t a significant amount.

During a meeting with lawmakers on Wednesday, Ip remarked that there aren’t many options left for local and state governments to enhance levies. This implies that the administration is bound to research alternative options.

At least one official believes he knows where to look. Tommy Cheung Yu-yan, chair of the Liberal Party and also an honorary voting member of the HKJC, has suggested that betting taxes may be extended to other sports, which could include the highly popular badminton and basketball.

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That’s relevant at a time when Danville, Rockford, and Waukegan are homes to new casino hotels, and as the debut of a temporary casino, a prelude to a permanent venue, nears in Chicago. Truist Securities gaming analyst Barry Jonas recently returned from visits to a broad swath of Illinois gaming properties, noting management teams are constructive on patrons’ spending patterns against the backdrop of a challenging macroeconomic outlook.

Property management teams noted the Great Recession was driven by excesses beyond players’ means (e.g., customers using equity from their overvalued homes). Trends today are more normal and steady, generally within players’ means,” noted the analyst.

On a year-over-year basis, Illinois gross gaming revenue (GGR) jumped 6.5% in the first three months of this year, but is trending lower in the current quarter, as lower-tier bettors scale back discretionary spending.

Illinois Casino Market Bracing

When accounting for venues that are either temporary or under construction, there are 16 casinos in Illinois.

By number of venues, Penn Entertainment (NASDAQ: PENN) is the largest operator in Illinois, with four casinos. The largest regional casino company is moving riverboat casinos in Aurora and Joliet ashore to what Jonas described as “materially improved locations.”

Among publicly-traded gaming companies, Caesars Entertainment (NASDAQ: CZR) is the next largest in Illinois with two properties, which Bally’s (NYSE: BALY) will tie with the debut of Chicago’s first gaming venue in 2026.

Speaking of Bally’s Chicago …

It’s possible that Rhode Island-based Bally’s could have its temporary Chicago casino in the River North open sooner than anticipated. Truist’s Jonas called it “the nicest temporary we’ve ever seen.”

The analyst added that the venue could exceed the operator’s forecasts of $50 million in yearly cash flow, which could prove pertinent as Bally’s looks for ways to finance the $1.7 billion permanent property.

The company “is exploring solutions to fund the project, which will likely include commitment of its own capital, some third-party aid, proceeds from a unique minority-equity plan, and possible real estate monetization elsewhere in the portfolio,” added Jonas. “Given a turbulent few years … management understands the importance of execution on what should turn out to be the flagship property in the company portfolio.”

Previously, Bally’s has engaged in sale-leaseback transactions, indicating it’s not shy about monetizing its real estate.

The post Illinois Casino Outlook Steady as New Supply Comes to Market appeared first on Casino.org.

In a recent note to clients, Citi analysts George Choi and Ryan Cheung boosted the firm’s 2023 gross gaming revenue (GGR) forecast to $22.25 billion, a 13% increase from the bank’s prior estimate. Should that new outlook prove accurate, it would represent 61% of the special administrative region’s (SAR) 2019 GGR.

Our research work shows that the visitation data are being tainted by the slow recovery in the usually lower-value group tour visitors,” noted the analysts.

Through May, Macau’s 2023 GGR figures have been solid, while still leaving ample room on the upside in terms of getting back to pre-pandemic levels. However, market participants are fretting about visitation rates, according to Citi.

Macau Visitation Concerns May Be Overstated

Broadly speaking, concessionaires’ first-quarter earnings conference calls didn’t feature much in the way of dour commentary regarding visitation and hotel occupancy rates in Macau.

There’s “scrutiny of the latest visitation data shows that recovery in hotel guests — usually a good proxy for high-value players — is already at 96% (of pre-pandemic levels),” added the Citi analysts.

To this point in 2023, what’s been lacking in the Macau rebound are tour group visitors. That segment is good for boosting occupancy and nongaming spending. But they are mass-market players, indicating operators aren’t dependent on group visitors to drive GGR.

“It is the slow — approximately 11%  — recovery in group tour visitors, mostly lower-wagering players, that is dragging the overall visitation recovery run rate,” opined Cheung and Choi.

Nongaming Amenities, Events

There are catalysts for Macau GGR momentum in the second half of 2023, including the introduction of new hotel room supply from operators such as Galaxy Entertainment, Melco Resorts & Entertainment, Sands China, and SJM Holdings.

“We expect concerts in the second half 2023, including the well-advertised Cantopop star Aaron Kwok resident concert series at Studio City and the Tencent Music Entertainment Awards 2023 in Galaxy Arena, to draw more high-value visitors,” concluded the Citi analyst. “(The events are) driving incremental visitation to Macau and playing a vital role in the solid second-quarter 2023 GGR recovery.”

The post Macau Recovery Brisker Than Expected, Says Citigroup appeared first on Casino.org.

In the latest edition of the EKG Line report, Eilers & Krejcik Gaming (EKG) hypothesizes that Fanatics will raise its offer for PointsBet US and come away with the business. While DraftKings’ all-cash offer of $195 million is 30% higher than the $150 million cash proposal floated last month by Fanatics, the Australian gaming company recommended investors accept the Fanatics offer.

Fanatics comes back to the table with an increased offer — perhaps in the $185 million range — that ultimately gets accepted by PointsBet,” noted EKG.

Closely held Fanatics has yet to reveal a revised bid for PointsBet US, but it has decried DraftKings’ offer as no more than interference.

PointsBet US Has Some Allure for DraftKings

For Fanatics, the value in PointsBet US is clear. The buyer gains a cost-effective avenue through which it can realize its goal of going live with mobile sports betting in at least a dozen states by the start of the 2023 NFL season.

“PointsBet has some value to DraftKings, too, especially with Banach Technology potentially helping with pricing for SGP, live betting, and player props. DraftKings could reason: if Angstrom is worth $200 million, as reported, Banach and the PointsBet customer database could be worth similar,” adds EKG.

At the moment, PointsBet is engaging with DraftKings regarding a potential takeover. However, the suitor’s offer isn’t yet binding. Hence, the Aussie company told investors to back the Fanatics proposal. DraftKings has until June 30 to formalize its bid for PointsBet US.

DraftKings Could Be Running Interference

It’s possible that DraftKings is doing no more than running interference and acting as a thorn in the side of Fanatics.

It’s clear that slowing down Fanatics — one of the maybe two companies with genuine ambitions to take its second spot in US OSB — is a massive factor. The initial non-binding offer looked timed to slow down the transaction and we expect DraftKings to slowplay proceedings as much as possible,” concludes EKG.

DraftKings has a history of playing the spoiler. In late 2021, it bid roughly $20 billion, and then around $22 billion, for Entain Plc (OTC: GMVHY), acting as a significant hindrance to MGM Resorts International’s (NYSE: MGM) efforts to acquire the Coral owner.

Today, Entain isn’t worth anywhere near $20 billion. But the DraftKings offer may have served the objective of keeping other prospective buyers from making bids for the UK-based gaming company.

The post Fanatics Likely to Up Offer, Ultimately Win PointsBet US, Says Research Firm appeared first on Casino.org.

The year-to-date loss makes Bally’s one of the worst-performing casino operators since the start of 2023.  The stock’s recent weakness against the backdrop of Rhode Island — its home state — legalizing online casinos is confounding and perplexing investors.

In a recent note to clients, Stifel analyst Jeffrey Stantial reiterated a “hold” rating on Bally’s, with a price target of $17, implying upside of 13.33% from the June 16 close. Stifel points out that Rhode Island’s decision to legalize iGaming essentially grants Bally’s a monopoly that could be worth at least $20 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

For BALY specifically, we estimate the iCasino opportunity in RI, as structured in the legislation, could imply $10-43M (~$21M base case) in incremental adj EBITDA, with likely minimal required capital outlay,” wrote the analyst.

Last week, Bally’s won approval for a temporary casino in Chicago and formal approval for its $1.7 billion integrated resort in that city.

Bally’s Stock Not Getting Rhode Island iGaming Love

With Rhode Island on pace to become just the sixth state to allow iGaming, a case can be made that more upside should have been assigned to Bally’s stock on that news.

“Nonetheless, the bill, as structured, appears to “gift” BALY a material growth driver, seemingly not reflected in recent performance, with shares -4% on Friday and -6% since the RI Senate first passed their respective bill,” Stivel added. “This suggests to us a potential tactical near-term trade opportunity, as more details surface in the coming days.”

While sports wagering is live and legal in far more states — and garners much more media attention than internet casinos — the reality is the latter provides operators with superior margins, lower overhead, and better long-term growth outlook than sports betting. Said another way, Stantial could be right that Bally’s stock deserves more adulation on the back of the Rhode Island news.

Don’t Sleep on Bally’s Rhode Island Benefits

Entering 2023, analysts expected a small number of sparsely populated states to join the legal sports wagering fray, and nothing on the iGaming legalization front. That confirms Rhode Island is indeed a pleasant surprise, and that the related headline should probably have had a more positive impact on Bally’s stock.

Gambling expansion tends to come in waves given the political narrative around cross-border tax revenue cannibalization, and hence we view any momentum favorably even if relatively small in scale,” concluded Stantial.

Bally’s currently operates land-based casinos in nine states. Of that group, Illinois would be the golden goose when it comes to iGaming. But a related legislative effort there recently failed.

The post Bally’s Stock Slump Could Spell Opportunity, Says Analyst appeared first on Casino.org.

That’s the take of Stifel analyst Steven Wieczynski, who in a new report to clients rated Red Rock “hold” with a $54 price target, implying upside of 15.7% from current levels. While the analyst pared near-term earnings estimates on Red Rock, he raised further out forecasts on expected strength from Durango.

We are raising our 2024/2025 EBITDA estimates as we believe our previous estimates were too conservative around the opening and ramp of RRR’s Durango project,” wrote Wieczynski. “Durango opening should be a catalyst, and we believe shares can work into that opening date.”

Red Rock believes Durango Casino & Resort will be successful because it’s in one of the few areas of Las Vegas that isn’t densely populated with gaming venues. If anything, the area where the venue is being built is underserved. The casino will feature 73,000 square feet of gaming space, a sportsbook, 2,000 gaming machines, and 40 table games.

Red Rock: Ultimate Las Vegas Locals

In addition to its namesake venue in Summerlin and the Green Valley Ranch in Henderson, Red Rock operates multiple gaming properties under the Station brand throughout the Las Vegas area. The company also runs 11 Wildfire casinos, including seven in Henderson, according to its website.

“The overall fundamentals in the LV Locals market continue to be healthy. We believe part of that strength is due to continued higher population/wage growth as well as favorable supply/demand dynamics,” added Wieczynski. “Moving forward, we don’t see any reason why those strong fundamentals shouldn’t continue.”

An influx of affluent retirees from other states, namely neighboring California, bolsters the long-term case for Red Rock shares, because many of those consumers have the capability to pay cash for Las Vegas real estate. Combine the elimination of mortgage obligations with lower property taxes and no state income tax in Nevada, and they have the discretionary cash with which to indulge in visits to Red Rock-operated casinos.

Red Rock Margin Growth Solid

Essentially, all regional casino operators, including Red Rock, improved margins in the aftermath of the coronavirus pandemic. However, analysts pondered for how long that theme would last, and there is some evidence it’s waning.

“We think this story becomes more attractive by the day and while we model flattish margins moving forward, if we are wrong, shares are massively undervalued at current levels,” concluded Wieczynski.

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Last December, NSW said that it would introduce new tax rates for land-based casinos as of this July. That announcement immediately had casino operators like Crown Resorts and Star Entertainment rewriting their financial projections.

Now, the tax plan has been put on hold. The backlash from operators over how the former government handled the situation found sympathy with NSW Treasurer Daniel Mookhey, who put the brakes on the increase.

Retooling the Taxes

At the heart of the decision to halt the new tax plan was the lack of dialog between the previous government and the casino operators. Mookhey told ABC Radio Sydney that officials had mismanaged the situation almost completely.

Mookhey is one of the new members of the NSW government, taking the place of former treasurer Matt Kean. He’s a Labor Party politician and a member of the NSW Legislative Council, but only became treasurer, as well as Minister for the Gig Economy, this past March.

The tax increase could have forced Star to pay as much as AU$364 million (US$246.82 million) more per year for its slot machines, depending on their use. This, the company has repeatedly stated, would have most likely meant a reduction in its workforce to compensate for the additional financial strain.

In response to the reprieve Mookhey has offered, Star CEO Robbie Cooke said he’s happy with the decision. He added that Kean’s tax hike was an “ill-conceived” plan that was devoid of consultation with the casino operators.

Kean answered in kind, pointing out that any major changes to Star’s operations were its own doing. He reminded the company that its financial hardships are the result of engaging in “fraudulent activities” that violated the law, including supporting criminals and laundering money.

Economic Downturn Coming

While no new taxes are coming right away, it hasn’t been all good news for Star or for Australia in general. The company was negotiating the sale of its Treasury Casino and Hotel Brisbane in Queensland in a lease-back deal, But that has fallen through.

There’s potentially more bad news coming if Mookhey’s assessment of the economy is correct. He said in a speech before Parliament on Tuesday that NSW faces “severe challenges” because of a slowing economy and rising interest rates.

He added that the new government is trying to overcome an additional AU$33 billion (US$22.36 billion) in spending requirements the previous government added to the budget. Much of this was to cover the cost of the COVID-19 pandemic.

Australia has six states and two territories, with NSW being a major contributor to the country’s economy. Currently, it accounts for around one-third of the entire economy.

NSW casino operators have won some time before a tax hike, but it won’t last. Mookhey said the government will take another look after the legislative winter break at the end of the year.

The post Casino Tax Hike Blocked by New Government in New South Wales appeared first on Casino.org.

Perhaps in an effort to ensure it’s not left empty-handed, the Australian gaming company advised investors to vote in favor of the $150 million acquisition proposal for its US unit submitted last month by Fanatics Betting & Gaming (FBG).

The Board continues to recommend that Shareholders vote in favor of the FBG Transaction at the Extraordinary General Meeting scheduled for Friday, 30 June 2023, while it considers the DraftKings Proposal,” according to a PointsBet statement.

DraftKings revealed a competing bid to the Fanatics offer nine days after eight of the 10 biggest institutional holders of PointsBet equity voted in favor of the FBG offer. Combined, those investors own 44.58% of PointsBet’s shares outstanding.

DraftKings on the ClockSome sports wagering analysts and industry observers speculated that DraftKings may be looking to play the role of spoiler, or thorn in the side of Fanatics. For its part, the original PointsBet US suitor claimed DraftKings is merely looking to block the transaction.

“In light of the anticipated heightened scrutiny of an acquisition of PointsBet by DraftKings, as compared to the FBG Transaction, please provide written confirmation that DraftKings will assume the risk of delay and/or denial of antitrust approvals, as we intend to hold DraftKings to a ‘hell or high water’ standard with respect to antitrust clearances,” wrote PointsBet Chairman Brett Paton in a letter to DraftKings CEO Jason Robins.

“As previously advised, it should be noted that the DraftKings Proposal does not constitute a binding offer or commitment on the part of DraftKings to negotiate or execute a definitive agreement, and to this end, there is no guarantee that the DraftKings Proposal will result in a binding definitive agreement,” according to the statement.

Previously, PointsBet warned investors that if wasn’t successful in reaching an agreement to sell its US sports wagering operations, it would likely be forced to sell equity at unfavorable prices, diluting current investors in the process.

DraftKings’ Offer is Strong

On paper, DraftKings’ offer for PointsBet US bests Fanatics’ bid by 30%. Alone, that’s a source of strength, and one that gives the target’s board something to think about.

It is possible DraftKings could further speed things along by presenting the target with a plan for dealing with financial losses in the US.

“Additionally, as discussed with you verbally, the Board requires a written confirmation, as soon as practicable, of DraftKings’ position on funding the cash burn of the US Business (noting that the FBG Transaction caps PointsBet’s cash burn at US$21m from 1 July 2023),” added Paton.

The post PointsBet to Engage with DraftKings in Takeover Talks appeared first on Casino.org.

Extending a long-running acquisition spree, Entain announced it is selling shares equivalent to 8% of its market capitalization to fund a $750 million of STS Holding — Poland’s biggest sportsbook operator. While the buyer promised the deal will be accretive to earnings per share (EPS), investors punished the stock on Thursday. With the help of a letter to Entain’s board from Eminence CEO and Chief Investment Officer (CIO) Ricky Sandler, the stock recouped some of those losses yesterday.

Still, the hedge fund boss didn’t mince words, noting the market’s repudiation of the share sale news “should be a wake-up call to Entain’s tone deaf Board and management team.”

Sandler added that while the STS may add to Entain’s earnings, those gains aren’t worth the price being paid for the Polish firm.

Moreover, while calling this deal ‘accretive’ on an EPS basis may be technically correct, it demonstrates that management either doesn’t understand finance or, worse, that they believe the Company’s shareholders are naïve,” added Sandler. “Issuing Entain stock at ~7x EBITDA (excluding the value of the BetMGM JV) to buy an asset at ~12x EBITDA is value destructive to shareholders, even with incredible synergies.”

New York-based Eminence owns 13.2 million shares of Entain, or 2.1% of the outstanding equity in the gaming company. The money manager has owned the stock since 2020.

Emince Warns MGM Could Circle Entain Again

Sandler warned that Entain’s mismanagement of the STS proposal and subsequent share price tumble could invite an unwanted takeover overture at a low price from MGM Resorts International (NYSE: MGM) — its partner in the BetMGM business.

“As shareholders lose confidence in Entain’s ability to allocate capital and create long term value, it is quite likely they will support a sale of the company to MGM at a materially lower price than previously assumed,” opined Sandler.

MGM has a recently acquisitive history, close to $6 billion in cash on hand, and avenues for raising more cash should it decide to make another run at Entain.

Selling Some or All of BetMGM

In the letter to the Entain board, Sandler expressed support for the company’s acquisition binge, as long as it happens at an effective cost of capital. On that note, he said the operator has options for raising cash.

“We believe that multiple attractive and value creating paths exist for Entain to raise capital to fund its M&A initiatives, including the potential divestiture of some or all of its stake in the BetMGM JV (joint venture),” he noted.

Previously, Entain hasn’t publicly expressed interest in selling any or all of its stake in BetMGM. But that could be a multi-billion-dollar transaction and serve the added benefit of potentially dissuading MGM from attempting to outright buy Entain.

The post Eminence Capital Chides Entain on Share Sale, Warns MGM Could Pounce appeared first on Casino.org.

Michael Rubin’s Florida-based company reportedly held an investor meeting at the NBA Players Association’s (NBPA) New York headquarters on Tuesday. An unidentified source with knowledge of the matter told CNBC that the event was attended by 100 institutional investors and representatives from investment banks vying to book the IPO. Another 300 people participated in the meeting over Zoom.

Attendees at the Fanatics investor day were reported wooed by seven-time Super Bowl champion Tom Brady, who’s an early investor in the company. Brady is also a minority owner of the Las Vegas Raiders, and one of the companies in which he’s an investor does business with Fanatics rival DraftKings (NASDAQ: DKNG).

Reinvigorated IPO Market Could Pave Way

As of June 16, there have been 72 IPOs this year on US exchanges, a 41% drop from the same period last year. Companies with ties to the gaming industry have been quiet on the IPO front.

To its credit, Fanatics hasn’t rushed the IPO process, and has been consistent in targeting a potential share sale at some point in 2023 after resisting a similar transaction last year. That could prove prescient, because the environment for large-cap growth stocks has improved markedly from 2022.

Fanatics could benefit by modestly accelerating its IPO plans, because the bulk of this year’s most anticipated offerings, including those by Chime Financial, Instacart, Reddit, and Stripe, haven’t priced as of yet.

IPO Could Provide Valuable Fanatics Insight

As a closely held company, Fanatics isn’t legally required to open its financial doors to a broad swath of the investing public. That will change if the firm proceeds with an IPO.

Should Fanatics go public, market participants would also have a better handle on the corporation’s finances and its ability to leverage capital to acquire sports wagering market share.

The post Fanatics IPO Could Be Near Following Conclusion of Another Investor Day appeared first on Casino.org.

In terms of percentage, the DraftKings proposal bests the Fanatics offer sheet by 30%. The new bid was publicized nine days after eight of the top 10 institutional holders of PointsBet equity, which combine to control 44.58% of the shares outstanding, voted in favor of the Fanatics proposal.

In a letter to PointsBet CEO Sam Swanell and Non-Executive Chairman of the Board Brett Paton, DraftKings CEO Jason Robins highlighted several reasons his company’s offer is superior to Fanatics’, including the points that the new suitor doesn’t need financing to get the deal done, a due diligence window of just three weeks, and the possibility of obtaining state-level regulatory approvals more rapidly than Fanatics.

As a licensed entity in all of the jurisdictions in which you operate the US Business, we believe that we are uniquely positioned to obtain the requisite regulatory approvals on a more expedient timeframe than under your Existing Agreement with Fanatics,” wrote Robins. “This higher level of deal certainty and speed to completion will enable PointsBet to return capital to its shareholders more quickly, which represents another reason that our Indicative Offer is superior to your Existing Agreement with Fanatics.”

Fanatics was looking to PointsBet’s US segment to boost its new entry in the domestic sports betting scene. Conversely, as an established player and the second-largest online sportsbook operator in the country, DraftKings has the luxury of kicking the tires on PointsBet simply to keep it out of the hands of a rival.

Timing of DraftKings’ PointsBet US Bid Relevant

The timing of DraftKings’ offer for PointBet’s domestic operations is pertinent for another reason. The company is slated to hold a special meeting on June 30 at which shareholders were scheduled to vote on the Fanatics bid.

In a Friday letter to shareholders, PointsBet acknowledged receipt of the DraftKings offer, pledging that its board will evaluate that proposal to determine if it truly is superior to the Fanatics pitch.

“It should be noted that the DraftKings Proposal does not constitute a binding offer or commitment on the part of DraftKings to negotiate or execute a definitive agreement and, to this end, there is no guarantee that the DraftKings Proposal will result in a binding definitive agreement,” said the Australia-based company in the letter.

“This suggests to us the deal is likely predicated on impeding the proposed acquisition by Fanatics, thereby slowing Fanatics’ product development process and inhibiting access to several key markets (in particular MI & NY),” wrote Stifel analyst Jeffrey Stantial in a note to clients on Friday.

Discussions between DraftKings and Entain ultimately collapsed, but there was speculation in the analyst community that the former merely bid for Entain not with the intent of seeing a deal through, but rather to keep rivals away.

PointsBet Deal Wouldn’t Harm DraftKings’ Profitability Path

While DraftKings investors may have short-term enthusiasm for keeping PointsBet US out of the hands of a competitor, their priority is seeing the company turn profitable. In a statement announcing the offer, DraftKings CFO Jason Park said acquiring PointsBet won’t impede the buyer’s efforts to generate positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024, and that the transaction could be accretive to earnings the following year.

“While we’ve heard some point to first mover advantage and Fanatics’ stated aversion to outsized marketing/promotional spend as complicating the market share outlook for Fanatics, DraftKings’ efforts to impede the deal appear to indirectly provide a vote of confidence in Fanatics’ potential with the right technology in place, in our view,” concluded the analyst.

The post DraftKings Bids $195M for PointsBet US Biz, Tops Fanatics Offer by 30% appeared first on Casino.org.

Churchill and partner Urban One are angling for a second referendum on the matter after a similar effort was narrowly defeated in 2021.

On June 13, 2023, Churchill Downs Incorporated’s 50/50 partnership with Urban One, Inc., RVA Entertainment Holdings, LLC, entered into a Resort Casino Host Community Agreement with the City of Richmond, Virginia (the “City”), to be the City’s preferred casino gaming operator subject to certification by the Virginia Lottery Department and a local referendum. The planned project is a $562 million world-class entertainment and gaming venue,” according to a Form 8-K filing with the Securities and Exchange Commission (SEC).

Churchill and Urban One officials estimate the gaming venue would generate $30 million in annual tax revenue and create thousands of good-paying jobs.

Tangible Potential Benefits for Churchill Downs Investors

Should the Richmond casino come to life, Churchill and Urban One will share in the economic perks, some of which will flow through to the former’s investors.

The analyst rates the stock “overweight” with a $155 price target. Of course, the Richmond casino has to come to life for investors to benefit, and there are no guarantees that will.

Some Virginia policymakers argue that the results of the 2021 referendum should stand and that it would be undemocratic to attempt the vote just two years after the fact. Conversely, supporters believe that Urban One and Peninsula Pacific Entertainment didn’t do an adequate job of informing voters about the benefits of a gaming venue. Churchill acquired Peninsula Pacific’s assets last year for $2.5 billion.

Some Virginia political observers believe the vote could be different a second time around simply because Churchill Downs has brand recognition Peninsula Pacific lacked.

Churchill Downs Other Projects

As noted above, Churchill has other irons in the fire beyond the Richmond casino plan. Those include the $200 million paddock enhancement at its eponymous racetrack in Kentucky, which is part of a broader $300 million plan to modernize that venue.

Beyond Richmond, the operator’s product pipeline includes plans for two other new gaming venues in Virginia as well as in Indiana and Kentucky. Churchill is established in Virginia through its ownership of six Rosie’s Gaming Emporium venues.

Currently, Churchill operates 12 casinos with more than 14K gaming machines and 300 table games across 10 states.

The post Churchill Downs Stock Could Wring Benefits from Richmond Casino appeared first on Casino.org.

IGT’s slot machine business, which is one of the three largest in North America and includes the iconic Wheel of Fortune series, has at least one prospective bidder. In a statement released earlier this week, gaming industry veteran Gary Green said he put together a private equity group, including Chinese investors and tribal casino operators, to bid for IGT’s slot machine business.

We have reached the point that our new Private Equity entity can present a Highly Confident Letter and several strategic possibilities that we believe will appeal to IGT’s shareholders and potentially win the endorsement of Deutsche Bank, Macquarie Capital, and Mediobanca – the company’s financial advisors,” said Green in a statement.

Green, who previously served as vice president of Trump Hotels & Casinos, was instrumental in getting IGT into the tribal casino market 20 years ago.

Other Buyers for IGT Assets Could Have European Flare

IGT’s Play Digital unit, which includes an internet casino entity and a business-to-business sports wagering platform, is likely to draw ample interest from suitors. Analysts speculate that the business would be broken up into two in a sale, with prospective buyers possibly displaying more enthusiasm for the iGaming arm.

“The online casino arm is a significantly more attractive asset in our view, with IGT games accounting for 17.4% of U.S online casino GGR,” according to Eilers & Krejcik Gaming (EKG) in the latest edition of the EKG Line report. “That’s behind only Evolution (and its near-monopoly on live casino) and ahead of Light & Wonder in third place at 16.2% share.”

As for the sports wagering unit, that too is likely to draw interest from European suitors, not domestic clients such as Circa, Maverick Sports, SuperBook, Betly, and Sportsbook Rhode Island.

“A buyer is more likely to come from the other side of the Atlantic, where partners include LNB (Belgium), OPAP (Greece), and Lottomatica (Italy),” added EKG.

IGT Attempting to Unlock Shareholder Value

Following the sale of its Italian digital gaming, gaming machine, and sports wagering operations to Gamenet Group S.p.A for $1.15 billion in late 2020, IGT depended on the lottery for the majority of its earnings.

“Management noted its belief that the intrinsic value of the company’s market-leading businesses and diversified cash-flow profile is not currently reflected in the stock price and that the timing is right to assess opportunities that may enhance value for IGT’s shareholders,” wrote Macquarie analyst Chad Beynon in a note out last week.

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Signs of that commitment arrived earlier today when the Peoples Bank of China (PBOC) cut its seven-day reverse repo rate by 0.1% to 1.9%. Market observers believe that could be a sign of more substantial stimulus efforts in the second half of 2023. That could stoke consumer spending, which could benefit Macau concessionaires.

Gross gaming revenue (GGR) and Trip.com’s (NASDAQ: TRIP) recent quarterly update confirm stimulus speculation is already boosting domestic travel in Chin.

Its (Trip.com) China-focused domestic travel business saw robust year-over-year growth (YoY), as domestic travel returned to pre-COVID levels, driving an impressive 124% year-over-year (YoY) gain in revenue. Accommodation reservation revenue increased 40% YoY, which represents a growth rate of 106% quarter-over-quarter, which is 15% higher than pre-COVID (2019),” according to KraneShares research.

On the repo rate cut news, shares of Las Vegas Sands, Melco Resorts & Entertainment (NASDAQ: MLCO), MGM Resorts International (NYSE: MGM), and Wynn Resorts (NASDAQ: WYNN) — the US-listed Macau casino stocks — are slightly higher in midday trading.

Stimulus Good News for Macau Casino Stocks

One of the primary reasons near-term monetary easing could be supportive of Macau casino stocks is that analysts expect a slight pullback in monthly GGR figures. That’s not alarming when considering the May gaming revenue update was the best for the special administrative region (SAR) since January 2020.

“The LVS story remains largely unchanged. Singapore continues to be a bright spot and a reminder of the strong pent-up demand in the region once travel restrictions are eased,” wrote Macquarie analyst Chad Beynon in a note out earlier this month. “In Macau, LVS is well positioned, given its critical mass of supply, recent investments (Londoner), industry market share (20-25%), and industry-leading margins.”

The primary objective of PBOC easing isn’t to lift gaming stocks. Rather, it’s to support China’s still fragile property market. It’s also aiming to bolster an economy that continues grappling with the adverse effects of a roughly three-year shutdown deployed because of the coronavirus pandemic.

Macau Casino Stocks Prove Sensitivity

While the gains for the aforementioned US-listed gaming equities aren’t jaw-dropping, the Macau units of Sands and Wynn displayed more positive correlations to the reverse repo rate cut.

On the stimulus news, Hong Kong and China were led higher by growth sectors including technology, consumer discretionary, communication services, and real estate. After the close, the rationale for the rate cut and stimulus was made evident by May aggregate financing and new loan data, which both missed expectations, i.e. both were higher month-over-month,” added KraneShares.

Macau gaming equities are consumer cyclical names that trade in Hong Kong.

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Reportedly, the Alexander-backed group also wants Stephen Morana to take over as 888 finance director, a role he previously held at Betfair. Betfair is now a unit of Flutter Entertainment (OTC: PDYPY). FS Gaming made the pitch to 888 Executive Chairman Jonathan Mendelsohn, who they want to replace with former GVC Chairman Lee Feldman.

“The sale of the Latvian business marks another positive step in the execution of our integration program,” said Mendelsohn in a statement. “This sale generates cash proceeds from a non-core market to support our deleveraging plans, as well as enabling reinvestment into our core and growth markets.”

888 Ripe for Management Shakeup

Gibraltar-based 888 is arguably primed for a management shakeup. Not only is the gaming company dealing with the regulatory aftermath of lax anti-money laundering protocols, it’s also grappling with C-suite upheaval.

Owing to the reputations of Alexander, Feldman, Morana, and other FS backers, it’s believed the investment community is warm to the idea of that trio taking the reins at 888.

“The one concern we would have with regards to Mr. Alexander’s possible appointment would be whether there are any possible risks from the ongoing HM Revenue & Customs (HMRC) Turkish investigation that could impact him personally,” wrote Goodbody analyst David Brohan in a report. “However, there is no doubting the wealth of experience that both appointments would bring to 888.”

What FS Gaming Could Want with 888 Holdings

Beyond the aforementioned management changes, FS Gaming’s plans for 888 aren’t yet clear. Should the investment consortium prove successful in reshuffling the gaming company’s management, doors open from there.

Those include potentially repurchasing shares of a stock the group views as deeply undervalued, or possibly positioning 888 for a sale.

Himself an avid bettor, Alexander is no stranger to dealmaking. In his more than 13-year stint as chief executive of GVC, now Entain, he oversaw the company’s entry into the BetMGM partnership with MGM Resorts International (NYSE: MGM). He also helmed GVC’s expansion from the owner of a single sportsbook to one of the largest operators in the industry, including in Europe and Australia.

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The West Virginia-based community bank isn’t a well-known bank brand on par with the likes of Bank of America and JPMorgan Chase. But online gaming operators know MVB Financial well, and depend on the institution to store client deposits.

That business model positions the bank to capitalize on the online betting boom, and analysts are taking notice. In a note to clients on Monday, JPMorgan’s Steven Alexopoulos reiterated his “overweight” rating on the stock, noting MVB is a foundational piece in banking for internet gaming operators.

We find that the MVB team has been forming an ecosystem around the bank over the past five years serving the online gaming industry (which was legalized at the federal level in 2018),” wrote the analyst. “It was very clear to us that MVB’s clients in the gaming industry value that MVB was committed to serving the industry from early on when other banks were either not interested or did not have specialized expertise to step in.”

Alexopoulos cut his price target on MVB to $24 from $35. But that forecast still implies upside of 16.8% from Monday’s close.

MVB Financial Baby Thrown Out with Regional Bank Bathwater

Shares of MVB Financial are lower by 6.68% and off 40.78% over the past year, with much of that carnage incurred earlier this year amid the collapses of Silicon Valley Bank and other regional banks.

Even with the chaos afflicting regional banks this year, MVB Financial is outperforming the S&P Regional Banks Select Industry Index on a year-to-date basis. Additionally, perhaps aided by sports bettors, MVB added deposits in the first three months of 2023, while many rivals saw clients depart.

DraftKings and FanDuel are reportedly among MVB’s top clients.

MVB Has Tech ‘Edge’

Alone, the bank’s iGaming/sports betting exposure gives MVB a growth feel rarely associated with small regional banks. But the company amplifies that proposition with its MVB Edge Ventures unit, which oversees the bank’s portfolio of fintech investments.

As MVB deepens its moat by building fintechs via Edge Ventures and invests in startup companies, the company has a front-row seat into how to best serve their niche clients and make them an invaluable partner in the industry,” added JPMorgan’s Alexopoulos.

Additionally, MVB’s overhead is low because it operates just eight branches across Virginia and West Virginia.

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The largest owner of gaming real estate in the country feels strongly regarding how its clients, which includes casino operator titans Caesars Entertainment (NASDAQ: CZR) and MGM Resorts International (NYSE: MGM), would fare in the event of material economic contraction.

VICI owns 10 Strip venues and 13 overall in Nevada, where its tenants include Apollo Global Management, Caesars, Hard Rock International, and MGM.

VICI Believes Tenants Learned Lessons

Owing to the cyclical nature of casino gaming, the industry would likely be vulnerable should a recession arrive. Specific to VICI, there’s some good news.

First, analysts see no signs of a recession playing out on the Las Vegas Strip. Second, the REIT believes its clients learned lessons during prior economic shocks, including the global financial crisis and the coronavirus pandemic.

“Those (REITs) that have access to capital, they’re going to get through this, they’re going to capitalize on it…REITs are going to come out winners,” said Mark Streeter, managing director at JP Morgan Chase & Co., at the conference.

VICI Has Deflation Insulation

Dating back to last year, a primary theme analysts and investors have focused on regarding gaming equities is the potentially adverse impact of inflation. Due to REITs’ reputation as inflation-fighting assets, VICI has held up relatively well over the past year, gaining 2.67%.

That doesn’t imply the REIT will be vulnerable if a deflationary environment arrives. For starters, inflation remains stubbornly high, indicating deflation is likely a ways off.

Second, VICI has a track record of performing well when deflation sets in. That’s highlighted by the stock’s impressive showing immediately following the worst stages of the COVID-19 pandemic. Finally, the bulk of VICI’s lease contracts with casino operators include escalator clauses that modestly raise rent annually or every few years.

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Shares of the largest regional casino operator are down 11.78% year-to-date, while rivals including Boyd Gaming (NYSE: BYD) and Red Rock Resorts (NASDAQ: RRR) are up an average of 24%. Sentiment surrounding Penn is dismal, but it’s possible it can’t get any worse, potentially paving the way for a mini-rebound by the beleaguered stock.

In a new report to clients, Stifel analyst Steven Wieczynski noted investors may be pricing in worst case scenarios with Penn stock that might not materialize.

At this point, we believe investors are pricing in not only a meaningful slowdown in the regional gaming consumer, but also effectively zero (if not negative) credit for their Interactive business,” wrote the analyst.

He has a “hold” rating on the stock with a $32 price target, implying potential upside of 22.13% from today’s close.

Points in Favor of Penn

Penn has been beset by multiple headwinds, including controversies tied to Barstool Sports founder David Portnoy and his future at the gaming company, investors speculating that there’s next to no value in the company’s digital business, and that consumers are poised to dial back visits to regional casinos.

“We would also highlight that our call volumes on PENN have increased materially over the last month, which could be a signal that current trading levels are finally starting to screen attractive for certain investor groups,” observed the analyst. “First, seems like there is little evidence that the regional gaming consumer is pulling back.”

Wieczynski added that another point in favor of Penn is that the operator is significantly less dependent on lower income patrons — the ones most likely to reduce spending and visitation during a recession — than it has been in years past. That could indicate its client base is better positioned to weather an economic downturn.

Penn Stock Is Cheap

If market participants aren’t convinced by the aforementioned factors, perhaps Penn’s rock-bottom valuation could be appealing.

“Management still sees 2023 guidance as conservative should current demand levels remain steady,” concludes Wieczynski. “Ultimately, we remain attracted to PENN’s FCF generation and believe that with a long enough horizon, current trading levels present an attractive entry point. With shares now trading ~6x earnings, we believe this is a name investors should be watching.”

Point is with headwinds already priced into the stock, Penn may be too cheap for some investors to ignore at current levels.

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The California-based company is hoping to have EDGE Boost, which features a virtual Visa debit card, operational by the start of the 2023 NFL campaign. On the surface, EDGE Boost’s concept could be appealing to a variety of bettors, particularly those in the recreational crowd.

That could be seen as a unique spin on the bonus/promotional marketing activity that’s so pervasive in the regulated US sports betting industry. But there’s a significant caveat: Sportsbook operators aren’t in the business of lending money, and the bonuses they pay out to clients don’t need to be repaid.

EDGE Markets Already Encountering Controversy

On its website, EDGE claims the Boost product is supported by any daily fantasy sports (DFS) platform or legal US sportsbook. Assuming that’s accurate, it’s likely essential to the fortunes of the company.

Join EDGE Boost and we will match deposits to leading sportsbooks so that you can bet with more and amplify your wins!,” according to the company. “At any time, you can repay the balance early with a fee to gain access to your full Boost balance. Every time you repay early, your available Advance Limit will increase.”

However, as Sports Handle reported, EDGE recently drew the ire of sportsbook operators, as the company was supposedly using 18 gaming firms’ logos on its website without permission. Those markings have since been removed, and a YouTube interview with CEO Seni Thomas promoting EDGE Boost is marked as “private.”

FanDuel and Fanatics were among the operators to express displeasure about EDGE’s use of their corporate logos, with the latter stating it has no plans to work with the company.

San Francisco-based venture capital firm Bullpen Capital is one of EDGE Boost’s financial backers. That company was an early investor in FanDuel, and holds stakes in other gaming entities, including Jackpocket and Swish Analytics.

The controversy doesn’t end there. Industry veterans and those with common sense believe that the cornerstone of responsible wagering is that the bettor is only wagering an amount he or she can afford to lose. Experts believe EDGE Boost encourages the opposite, providing more capital to novice bettors and potentially paving the way to financial and betting problems.

For its part, EDGE partners with BetBlock and the National Council on Problem Gaming (NCPG).

EDGE Boost Details

In an interview with 4for4 Fantasy Football’s Connor Allen, Thomas draws parallels between EDGE Boost and traditional BNPL companies, such as Affirm and Klarna, as well as the popular investing app Robinhood.

“Just like Afterpay and Affirm, you pay back principal — basically what we gave you — over four weeks. There’s no interest, no fees,” said Thomas.

That begs the question “How does EDGE Boost make money?”

“We make 2% per transaction on the transaction fees that Visa pays us,” Thomas noted in the interview. “If the user puts in $100 and we put in $100, we’re actually making 4% on our money.”

The EDGE chief executive officer noted the company can generate 48% return on invested capital annually using the aforementioned model.

In order to garner those fees, EDGE must be officially partnered with Visa (or Mastercard) — a status the company has yet to attain — but Thomas added his company is participating in Visa’s Fintech Fast Track program.

That platform is designed “to help fintech and crypto companies bring new payments solutions to market,” according to Visa.

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The Bellagio operator placed 596^th on the rankings, ahead of venerable firms from other industries such as Colgate-Palmolive, Blackstone — the owner of Bellagio’s real estate — and Southwest Airlines, among others. MGM surged 147 spots on a year-over-year basis, placing nearly 700 spots ahead of rival Las Vegas Sands (NYSE: LVS).

The Global 2000 ranks the largest companies in the world using four metrics: sales, profits, assets and market value,” according to Forbes. “There are 58 countries represented by the publicly traded companies on the list. The U.S. leads the way with 611 companies on the ranking, and China comes in second with 346 Global 2000 companies.”

MGM ranked fifth in the hotel, restaurant and leisure category while Sands placed 17^th. Based solely on market capitalization, Sands is more than double the size of the Cosmopolitan operator.

MGM Redemption Story

Like other casino operators, MGM was punished in the immediate aftermath of the coronavirus pandemic as it was by lengthy closures of its gaming venues on three months: Las Vegas, Macau and throughout its regional portfolio.

“While MGM has some capital outlays over the medium to longer term related to its development pipeline (NY / Japan), the current construct of the cash flows and the balance sheet allow for continued capital returns to shareholders via buybacks,” wrote Deutsche Bank analyst Carlo Santarelli in a note to clients today.

He added that current pricing on MGM stock is attractive enough for the operator to continue its aggressive share repurchase program. The analyst rates the shares “buy” with a $58 price target, implying 40% upside from the June 8 close.

Not Many Gaming Companies on Forbes 2000 List

The concentration of gaming companies on the Forbes 2000 rankings is small. After MGM, the next highest-ranked firm with exposure to the industry is VICI Properties (NYSE: VICI) in the 758^th spot. That’s MGM’s primary landlord and the largest owner of gaming real estate in the U.S.

Among Macau concessionaires, Galaxy Entertainment joins MGM and Sands on the list, but Melco Resorts & Entertainment, SJM Holdings and Wynn Resorts (NASDAQ: WYNN) didn’t make the cut. The only other domestic casino operator to appear on the rankings was Caesars Entertainment (NASDAQ: CZR) in the 1,280 spot.

Other gaming entities on the overall rankings included FanDuel parent Flutter Entertainment, which surged 239 spots to 1,077. Slot machine giant Aristocrat Leisure gained 33 places from the 2022 rankings, ascending to the 1,611 slot.

The top five spots were commanded by JPMorgan Chase, Saudi Aramco and three Chinese state-controlled banks.

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The gaming regulator published its findings on its website, pooling operator-supplied data from March 2020 to March 2023. The report includes information from around 80% of the market, with some operators apparently not adequately supplying their performances.

The results show a steady increase in gambling and betting activity across the three-year period. This is the same time frame within which the UKGC has previously stated the UK’s “problem gambling” rate dropped from 0.4% to 0.2%.

Britons Increase Gambling Spend

In the most recent quarter, January to March of this year, the online GGY was £1.3 billion (US$1.63 billion). This represents a 5% year-on-year increase, driven by a 9% increase in “total bets and/or spins” and an 11% increase in the average tally of active accounts.

That total is 13% greater than it was a year ago, with total bets achieving 19% growth. Given that last year’s Cheltenham reportedly delivered an economic boost of £274 million (US$344.22 million), this year’s race was likely even more significant.

Online slot activity increased, as well, but not as much. Through licensed operators, Britons provided a GGY of £552 million (US$693.47 million), a 2% increase from 2021 until now.

The number of virtual spins increased by 9% during that period. At the same time, there were more active accounts, with a monthly average of 3.9 million. That represents a 15% jump.

More people were spending more time at the virtual slots, with the UKGC reporting a 10% increase in the number of slot sessions that lasted more than an hour. The average session, however, was just 17 minutes.

Land-based gambling through licensed operators added 6%, closing at £585 million (US$734.93 million). This refers only to sports bets and slots, and represents a 2% increase in the total number of bets and spins.

What the Report Misses

The UKGC cautions that the information only gives a limited perspective and shouldn’t be compared to the “industry statistics dataset.” This, it explains, is because it doesn’t break down operator input about free bets or promotions, and is missing data from some operators.

Over the long term, without a detailed explanation from the UKGC, this could greatly impact industry data. It isn’t clear, and the commission hasn’t said, why it would need to recategorize activity. But moving one segment to another will permanently skew historical data.

Still, the UKGC is confident it’s on the right track. It added new regulations two years ago that changed the online slot segment, such as a ban on autoplay and reduced betting limits. It asserts that didn’t lead to any “harmful unintended consequences.”

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The list of potential winners includes the usual suspects, namely FanDuel and DraftKings (NASDAQ: DKNG). In a Wednesday note to clients, JMP Securities analyst Jordan Bender highlighted the two online sportsbook giants as possible beneficiaries of legalization in the Tar Heel state.

The existing daily fantasy sports (DFS) market in North Carolina puts FanDuel and DraftKings in a favorable position to cross-sell the database, a nearly identical demographic, into the sports betting app,” noted the analyst. “Together, the two companies garner approximately 75% of the sports betting revenue in the US.”

By market share, FanDuel is the top online sportsbook operator in the US. Flutter Entertainment (OTC: PDYPY) owns 95% of the company, while the other 5% is controlled by Boyd Gaming (NYSE: BYD).

Southern Surprises

Entering 2023, it was expected that state-level legislative action on sports betting could be sluggish, a scenario that was amplified by the failure of related legislation in Georgia, and more recently, Texas.

However, some surprises emerged in the South, starting with Kentucky approving sports betting, and North Carolina following suit. While North Carolina isn’t an outright surprise — lawmakers there have toyed with the issue for some time — it’s still a coup for operators such as DraftKings and FanDuel.

College hoops is arguably the most beloved sport in the state. That’s making the expected January 2024 launch date of mobile sports betting vital to the industry and the state’s revenue collection efforts.

As JMP’s Bender notes, DraftKings and FanDuel could enjoy another advantage in the state: there are no commercial casinos there. On a related point, Caesars Entertainment (NASDAQ: CZR) could be a North Carolina sports wagering winner because it manages two tribal casinos under the Harrah’s brand there.

Don’t Forget Genius Sports

Sports betting data provider Genius Sports (NYSE: GENI) was also highlighted by Bender as a potential North Carolina sports betting winner.

We recently recommended Genius Sports as our top pick to own in the sports betting space,” added the analyst. “The incremental revenue comes at no cost/investment to the company, with its business model based on the volume of wagering.”

One way of looking at the above is that the more folks wager, the more revenue Genius can generate from its sportsbook clients.

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Last month, Light & Wonder offered $422 million in cash, or $20 a share, for that 17% slice of SciPlay. That values the target at a 28.5% premium to its last closing price before the bid was publicly revealed.

The Special Committee has been granted full authority to independently review and evaluate the non-binding proposal that the Board received from Light & Wonder,” according to a SciPlay statement.

The committee members are Gerald Cohen, April Henry, Michael Marchetti, and William Thompson, with Cohen and Henry acting as cochairs. Lazard will act as the committee’s financial advisor, while Sullivan & Cromwell LLP was retained as legal counsel.

Assessing Light & Wonder, SciPlay Ties

There are obvious ties between the two companies. Currently, Light & Wonder owns 83% of the equity and 98% of the voting interest in SciPlay, making it nearly impossible for the latter to consider a sale to another party. Formerly the social gaming division of Scientific Games, SciPlay was spun off from that company in 2019.

Of that quartet, only Marchetti has direct mobile gaming or social casino experience. He previously served as chief executive officer of Buffalo Studios, creator of the popular Bingo Blitz social game. That company was eventually sold to Caesars Interactive, and that title is now controlled by mobile games developer Playtika (NASDAQ: PLTK).

SciPlay cautioned investors there are no promises a deal will be reached. In fact, the two sides are less than two years removed from Light & Wonder attempting to bring SciPlay back in-house. Those talks ultimately fell apart.

“There can be no assurance that any definitive offer will be made by Light & Wonder, that a definitive agreement will be executed relating to the Proposed Transaction, or that this or any other transaction will be approved or consummated,” according to the statement.

Deal Could Make Sense for SciPlay

Since the new offer was revealed on May 18, shares of SciPlay flirted with $20, but have not closed at that price.  The stock closed at $19.35 on Thursday.

Looking further out, some analysts believe a reunification with Light & Wonder makes sense for SciPlay. That’s because the former parent’s stake in the social casino firm acts as an overhang that depresses its valuation.

Additionally, with Light & Wonder controlling 98% of SciPlay’s voting equity, the latter’s options in terms of a sale are likely limited to its former parent.

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Dealreporter reported Thursday that Advent International and CVC Capital Partners are kicking the tires on the Israeli gaming firm. That article surfaced about two months after another suggested unidentified private equity shops expressed initial interest in Playtika.

Formerly a unit of Caesars Entertainment, Playtika is the developer of popular social casino games, including Bingo Blitz, Caesars Slots, Slotomania, and World Series of Poker (WSOP) Social, among others.

Playtika Long Looking for a Deal

Playtika’s interest in a possible investment from an outside group or outright sale isn’t a secret. The company announced a strategic review, which could include a sale, in February 2022.

That implies PHUK II holds considerable sway at Playtika, and it might not sign off on a transaction that values the mobile gaming company at less than $4.4 billion.

Previously, technology buyout fund Joffre Capital attempted to take a controlling interest in Playtika. But those plans were ultimately scrapped after Joffre Managing Partner and cofounder James Lu resigned from the Playtika board. On his way out the door, Lu lambasted the Playtika board for a lack of independence, claiming the directors were controlled by management.

Attraction to Playtika Understandable

Whether it’s a private equity firm or another gaming company, the purported interest in Playtika is understandable, because the firm is proficient at in-app sales. Playtika’s games are usually free to download and play. But game-play can be enhanced via revenue-generating, in-app purchases.

Some consumers decry that strategy because it requires outlays of real money for virtual chips or currencies that have no value outside of the game. That might not be of concern to Playtika suitors.

Speaking of suitors, CVC’s interest in Playtika is sensible because the investment firm already has some gaming exposure via Gaming1 and European sportsbook giant Tipico.

“Gaming1 is a leader in the Belgian gaming market and is present in nine countries around the world, including Portugal, France, and the United States with their joint venture Gamewise founded with the American giant Delaware North,” according to CVC.

Advent International’s current investment portfolio doesn’t feature direct gaming exposure. But the firm holds stakes in a variety of well-known consumer and technology brands, including Coffee Bean & Tea Leaf, Lululemon, and Transunion, among others.

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Those options could include sales, mergers, or spin-offs of the businesses, or retaining the segments and boosting investment in those entities. The London-based company believes evaluating alternatives for those units can unlock shareholder value.

We believe the intrinsic value of IGT’s market-leading businesses and diversified cash flow profile is not currently reflected in our stock price and the timing is right to assess opportunities that may enhance value for IGT’s shareholders,” said IGT Executive Chairman Marco Sala in a statement.

IGT investors greeted the news favorably as the stock is higher by 14.36% on volume that’s more than triple the daily average in late trading. The company has retained Deutsche Bank, Macquarie Capital, and Mediobanca as financial advisors.

‘Unpacking’ IGT’s Investment Thesis

When it created its iGaming and sports wagering unit in September 2021, an eventual spin-off was seen as a possibility.

“We have argued that an ‘unpacked’ IGT should be worth considerably more than where it trades. ~70% of IGT EBITDA is generated from the lottery,” wrote B. Riley analyst David Bain in a note to clients. “Lottery valuations are over ~40% higher than IGT’s. Further, given forecasted peer-high gaming supplier EBITDA growth, investor familiarity with gaming businesses, and established valuation ranges for digital businesses within supplier companies, we believe a bifurcated public gaming/digital pure-play entity listed in either the U.S. or Australia should also trade at an augmented valuation versus IGT.”

Bain rates the stock a “buy” with a $43 price target, implying upside of roughly 48% from the June 7 close.

Value-Creating Opportunity

Corporate transactions, including spin-offs or selling segments, are usually undertaken to create value for shareholders, and that’s undoubtedly the case with IGT’s evaluation process.

There are no guarantees transactions will be agreed to and IGT is likely to be quiet on the matter until agreements are close to being reached.

“No decision has been made regarding any alternative, there is no timeline for the review, and there can be no assurance that the exploration of strategic alternatives will result in any transaction. IGT does not intend to comment on or provide updates regarding these matters unless and until it determines that further disclosure is appropriate or required,” according to the statement.

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A temporary version of the Golden Nugget Danville Casino opened late last month. That’s as its operator, New York-based development firm Wilmorite Management Group, awaits final approval from the Illinois Gaming Board (IGB) for a permanent venue in the city of roughly 33K. The casino is a joint venture between the Wilmot family and Tilman Fertitta, whose Fertitta Entertainment Inc. (FEI) controls the Golden Nugget brand.

Mayor Rickey Williams, Jr. believes the gaming venue will be a significant boon for the city’s ailing public pension system.

We are going to be putting 90%, this year, of the money that we receive from the casino, directly toward extra pension payments,” said the mayor in an interview with Laura Williams of 1490 WDAN. “We anticipate that to be about $5 million.  We believe, that within the next 12 to 15 years, that we could actually be fully funded.”

Danville is subject to an Illinois mandate that its firefighter and police pensions be 90% funded by 2040. It’s estimated that annual contributions from Golden Nugget Danville could amount to 10% to 12% of the city’s budget, potentially providing significant relief for the strained retirement plans.

Golden Nugget Could Help, but Not Cure

At a November 2022 city council meeting, Williams said the plan is to get 100% funding by 2040, beating the 90% requirement. That’s an ambitious goal, and one that’s likely to require contributions from sources beyond the Golden Nugget.

The county seat of Vermilion County, Danville was selected in 2020 as the site of a new gaming property in Central Illinois. Wilmorite expects the venue will have 500 slot machines, 14 table games, a sportsbook, a steakhouse, and a food court.

While Wilmorite is making financial contributions to enhance Danville’s Boys & Girls Club and update the city’s sewer system, the ability of the Golden Nugget to provide ballast to the city’s public pensions remains to be seen.

Casinos Not Silver Bullets

New gaming venues do present cities and states with fresh revenue-generating opportunities. But analysts and pension experts widely assert casinos are not a panacea for decrepit public retirement programs.

Still, cash-strapped Illinois will take revenue where it can get it, and that includes new gaming venues in Chicago, Danville, and Rockford.

Of the 15 worst-funded public pension plans at the end of 2022, eight were in Illinois, according to Equable. Chicago’s city employees’ retirement systems debt exceeds that of 44 states, and the overall public pension debt faced by Illinois is surpassed only by California,- a state that’s more than triple the size of Illinois.

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It’s the first move of note by Alexander since his surprise 2020 departure from GVC, which later became Entain Plc (OTC: GMVHY). FS Gaming Investments also has financial backing from former GVC Chairman Lee Feldman and Shay Segev. Segev succeeded Alexander at GVC and was the architect of the gaming company’s acquisition of Ladbrokes and its transformation to Entain.

Those issues came to light after former chief executive officer Itai Pazner departed amid concerns about the operator’s anti-money laundering protocols. Pazner’s resignation arrived just days after it was revealed Yariv Dafna would vacate the chief financial officer role. Just two months prior, the Gibraltar-based company was slapped with compliance-related fines by the General Directorate for the Regulation of Gambling, which is Spain’s gaming regulator.

888, William Hill Marriage Has Been Bumpy

Last July, 888 paid $765 million to Caesars Entertainment (NASDAQ: CZR) to acquire William Hill’s non-US assets.

At the time, it was viewed as a shrewd move by the buyer due to its dearth of sports betting exposure and the fact that William Hill is one of the most venerable brands in the European sportsbook landscape.

However, the aforementioned compliance failures and the removal of the stock from the FTSE 350 Index have weighed on the shares, which are lower by 60% over the past 12 months. That’s opened the door to outside investors, such as Alexander’s FS Gaming Investments, to get involved and push for change.

We welcome the investment of FS Gaming which we believe reflects the significant value creation potential in our business,” according to an 888 statement issued to UK media. “The board remains highly confident in its long-term strategy to maximise value for shareholders. We look forward to updating and engaging with all our shareholders as we continue to deliver against our clear strategic and operational priorities.”

Unidentified sources with knowledge of the matter told the Financial Times that FS Gaming could push 888 to more efficiently integrate William Hill and, potentially, grant board seats to Alexander and Feldman.

888 Could Be Takeover Target

Activist investors can argue for a variety of changes, including corporate actions such as asset divestments or outright sales. Both are seen as longer-ranging possibilities with 888.

Potential buyers for 888 weren’t identified, but due to its control of William Hill, the company could draw interest from Europe-based rivals as well as private equity firms if it decides to sell itself.

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