The Pandemic Proof $53 Billion Industry Wall Street Can’t Ignore
FN Media Group Presents Financialmorningpost.com Market Commentary
New York, NY – June 13, 2020 – Millions of Americans and Canadians – and billions of people across the world — love to gamble. Especially on sports, which generates 70% of global gaming revenue: more than lotteries, poker, casinos, and any other form of gaming – combined. Mentioned in today’s commentary includes: Scientific Games Corporation (NASDAQ:SGMS), Madison Square Garden Sports Corp. (NYSE:MSGS), Las Vegas Sands Corp. (NYSE:LVS), Boyd Gaming Corporation (NYSE:BYD), International Game Technology PLC (NYSE:IGT).
In 2017, the global sports betting market was around $104.31 billion. Worldwide sports wagering according to some sources is expected to reach $155.49 billion by 2024. Today, the coronavirus pandemic has locked-down countless casinos and other live venues for wagering. For instance, wagers on sports at bookmakers in New Jersey fell 68% in April alone.
But there is a flip side: a huge boom in online gaming and gambling. And among the companies poised to benefit from this digital trend is FansUnite (FANS.CN; FUNFF) – an online sports betting company that has tremendous upside but is currently a small-cap early stage entry point.
The Economist says, “COVID-19 has driven American gamblers online… with casinos shut and sports disrupted, gamblers have still gotten their fix.” And in these unprecedented times, it’s esports that is garnering the attention from all sports fans who can’t go to stadium games or even watch them on TV.
Streetwise Reports says online sports is “an elixir for fun-starved fans.”
“The stay-at-home lifestyle we now face in 2020 could result in a massive shift in the habits of players,” said FansUnite CEO Darius Eghdami. “Players that are used to going to the physical casino or the horse track may now shift their habits to online. ”
FansUnite (FANS.CN; FUNFF) with its sophisticated online betting platforms, is one of several industry leaders positioning themselves to benefit from this change in consumer behavior triggered by the coronavirus pandemic. In 2019, the global online gambling market was $53.7 billion. But in the age of COVID-19, online gambling is expected by some analysts to increase at a compound annual growth rate of 11.5% from 2020 to 2027.
With stay-at-home and lockdowns remaining in force in so many states, the quarantine-fueled explosion in online gambling, mergers and acquisitions in the internet gaming space are on the upswing. And M&A, especially in the gambling sector, recently has had an impressive track record of generating handsome profits for investors who got in early.
The next big play in Canadian gaming
Now, a similar play – one with enormous potential for the companies involved – is unfolding even as we speak: FansUnite Entertainment Inc. is a sports and entertainment company focusing on technology for regulated and lawful online sports betting.
In June 2020, FansUnite and Askott Entertainment Inc. entered into an amalgamation agreement. FansUnite will acquire all outstanding secure of Askott to create one of Canada’s leading online gaming companies focused on sports betting, esports wagering, and casino games.
Askott focuses on esports betting with multiple B2C platforms and several B2B contracts signed. Two are live and generating revenue; the other two are expected to go live this year. A new sales team, upon completion of the acquisition, will be responsible for bringing in 10 or more additional clients quickly. This could cause B2B revenues to grow and compound at a rapid rate.
Plus, FansUnite wholly owns McBookie, which operates solely in the UK with a focus on casinos, virtual sports, and sports betting. McBookie has around 10,000 active players and has approximately $350M CAD of betting volume since inception.
FansUnite’s shareholders are supportive of the company’s aggressive M&A strategy. The company has shown an ability to complete financing if required. Their first deals were heavily stock-based acquisitions, with the leadership team leveraging their experience and the opportunity to share in future growth as a key aspect of the deals.
Another plus is that FansUnite’s board and executive team have decades of experience in strategy, M&A, esports, sports betting, launching and growing new brands in the gaming space, and licensing government relationships and transactions to develop shareholder value.
CEO and co-founder Darius Eghdami has been in the sports betting and handicapping industries for over a decade, and some industry experts have been keeping their eye on him. Darius was named to the TMX Group’s Top 150 Entrepreneurs, a distinction he is showing was well deserved.
Cutting edge technology in a burgeoning industry.
The float for FansUnite (FANS.CN; FUNFF) is small. All insiders are locked up for 12 months, showing confidence in their long-term vision for the company. Experience shows that the lion’s share of the opportunities and synergies are identified within the first 6 to 12 months of the merger.
Once you read about the deal on the front page of the Wall Street Journal or Financial Times, the company has probably made it. Which means investors should watch this company carefully between now and when the merger is completed or right after that.
As mentioned, global online gambling is already a huge market with $53.7 billion in annual revenues. And online gambling is forecast to increase at a compound annual growth rate of 11.5% from 2020 to 2027.
International Game Technology (IGT) is a service provider that has helped bolster this trend, and it’s done so without having to handle the risk of managing sportsbooks. All it needs to do is fulfill the needs of companies like MGM, constructing infrastructure that make the boom in sports betting possible.
IGT, working alongside FanDuel, is ready to make a splash in New Jersey, the biggest new sports betting market. IGT will provide platforms for FanDuel’s services, merging the world’s largest gaming manufacturer with the largest sports betting platform in the world.
Like IGT, Boyd Gaming (BYD) is has made major moves to adapt, as well. Boyd has been hit hard by lockdown orders, but it is positioning itself to be a major player in the emerging sports betting sector.
This company has some unique experience from the Vegas Strip: for the last decade, Boyd Gaming has handled the biggest sportsbooks in Sin City. And now that sports betting is legal, it’s preparing to branch out into other regional markets.
The company signed a deal with MGM Resorts, the casino chain that’s trying to corner the sports betting market. The two companies have agreed to share online and mobile gaming platforms, with MGM offering up its online poker and casino gaming apps for Boyd’s sportsbook, in 15 states.
Scientific Games (SGMS) is another veteran that is pivoting to online products. Even though Scientific Games is headquartered in Las Vegas, make no mistake about it, they are a global company with a presence on six continents. And their presence is far reaching. From digital gaming solutions to innovative lottery and sports betting products used across the planet, Scientific Games aims to take their customer’s revenue and the players’ experiences to the next level.
And not only do they talk the talk, they walk the walk and can show the stats to prove it. With groundbreaking data analytics and insights into some of the most difficult to read marketing stats in the business, Scientific Games really sets itself apart from the competition.
FansUnite has been operating independently since 2013. But now that FansUnite is about to merge with Askott Entertainment, it’s a whole new ball game.
The new FansUnite will have the technology, subscriber base, and management team to achieve its primary mission: to become one of the big players that dominate this niche – and become the largest iGaming provider in Canada.
And while online betting gains momentum, it’s important to stress that when lockdowns end, anyone that has any exposure to the industry could have some upside potential. As billionaire Dallas Mavericks owner Mark Cuban told CNBC right after the Supreme Court ruling on sports betting in May, “I think everyone who owns a top-four professional sports team just basically saw the value of their team double.”
The $4.6-billion market cap Madison Square Garden (MSGS), which owns the New York Knicks and the New York Rangers, now appears to be undervalued after taking a heavy beating from the COVID-19 lockdowns. Longer-term, investors should be looking at the massive market potential for sports television and streaming rights right now. And when live events return, it will likely see some massive upside.
Even more traditional gambling institution have tremendous potential. Las Vegas Sands (LVS), for instance, is an iconic developer and operator of high-class luxury resorts and casinos around the world. Starting with just a single property a little under 30 years ago, Sands has grown to become an international powerhouse with business and leisure establishments in Las Vegas, Macao, Singapore and more. Though casinos across the globe have struggled in recent months, with reopenings abound, companies like Las Vegas Sands are likely to benefit.
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FORWARD-LOOKING STATEMENTS: Certain information contained herein may constitute “forward-looking information” under Canadian securities legislation. Forward-looking statements may include, without limitation, statements relating to future outlook and anticipated events, such as the satisfaction of the conditions precedent and subsequent consummation of the Askott transaction; realizing FansUnite’s plans regarding expanded consumer base, business base, offerings and gaming licenses; that Saxon Shadforth’s contacts and experience will be a major asset; the growth of the online gambling market; its plan to grow by acquisition; the combined companies’ ability to scale their platforms, to enter into new and emerging international gaming markets, to capture the growing demand of gamblers and to become a global gaming leader; the strengths, characteristics and potential of the combined company; the company’s ability to become one of Canada’s leading gaming companies; the ability to launch a proprietary sportsbook as well as selling software to other sports books, making money on every bet made on the platform; and discussion of future plans, projections, objectives, estimates and forecasts and the timing related thereto. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of FansUnite to be materially different from those expressed or implied by such forward-looking statements. Matters that may affect the outcome of these forward looking statements include that online gaming may not turn out to have as large a market, grow as quickly or be as lucrative as currently predicted; FANS may not be able to offer a competitive product or scale up as thought because of consumer tastes for its online product, lack of capital, lack of facilities, regulatory compliance requirements or lack of suitable employees or contacts; Mr. Shadforth’s experience and contacts may not result in material benefits; FANS’s intellectual property rights applications may not be granted and even if granted, may not adequately protect FANS’ intellectual property rights; risk factors for the online sports gaming industry in general also affect FANS including without limitation the following: competitors may offer better terms to potential M&A acquisition targets, or no such target may actually be acquired even if agreements are signed; competitors may offer better online gaming products luring away FANS’s customers; technology changes rapidly in the gaming and esports business and if FANS fails to anticipate or successfully implement new technologies or adopt new business strategies, technologies or methods, the quality, timeliness and competitiveness of its products and services may suffer; FANS may experience security breaches and cyber threats; regulators may impose significant hurdles to online gaming companies; FANS may not receive applied for gaming licenses; FANS’s business could be adversely affected if consumer protection, data privacy and security practices are not adequate, or perceived as being inadequate, to prevent data breaches, or by the application of consumer protection and data privacy laws generally; the products or services FANS distributes through its platform may contain defects, which could adversely affect FANS’ reputation. Additional information regarding the risks and uncertainties relating to the Company’s business are contained under the heading “Risk Factors” in the Company’s Non-Offering Prospectus dated March 27, 2020 filed on its issuer profile on SEDAR at www.sedar.com. Accordingly, readers should not place undue reliance on forward-looking statements.
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