SPACs remain a ‘core part’ of US sports betting despite ‘indigestion’

As the US sports betting industry continues to expand state-by-state, many operators are becoming increasingly drawn towards the prospect of public listings, a goal which SPACs can still play a key role in achieving, according to a panel of industry experts at the SBC Digital North America event.

Moderated by Anton Kaszubowski, Director at Greenlaw Limited, the speakers on the Sportradar-sponsored panel ‘M&A is hot right now – are we witnessing the golden age of US sports betting?’ discussed a range of topics in the field of Mergers & Acquisitions affecting the North American sports betting and gaming space.

Identifying SPACs as a ‘very viable way’ for firms to go public, Matt Davey, Tekkorp Digital Acquisition Corp CEO, highlighted that traditional IPOs only allow investors to observe historic revenues, whilst many investors wish to investigate and identify forecasted earnings.

“There are some attributes to SPACs that lend themselves to the gaming industry, but it’s not a cure all,” the CEO detailed. “It’s not the best process for every single company, so we shouldn’t be out there trying to paint a broad brush on that, but for specific businesses there are some real advantages.”

Although Davey did acknowledge that there had been some ‘indigestion’ in the American SPAC market due to ‘enormous’ volumes of capital investment, he maintained that SPACs will continue to play a pivotal role for certain firm’s that have identified public listing as a key commercial goal.

Lloyd Danzig, Founder and Managing Partner of Sharp Alpha Advisors, agreed with Davey that the SPAC market in the US had experienced some indigestion, but predicted that the betting and gaming market would see further acquisitions leveraging SPACs.

“The gaming industry does have a lot of very highly valuable, high SPAC-able targets that from a fundamental perspective really do support the case for SPACs,” he remarked.

Focusing on the appeal of the betting industry for investors, Davey noted: “This is a real product. Everyone can understand sports betting and they know that demand is sustainable, and will likely grow over time, which should provide a strong regulatory environment for itself.”

He remarked: “It really comes back to the fundamentals: you look at good quality businesses with good quality management and good prospects in the future, those businesses get funded. I think you’ll see SPACs be a core part of the overall capital markets ecosystem for many years to come.”

Reiterating the point, Danzig added: “I really do think there is fair reason for concern in other industries about whether SPACs have a future, but unquestionably when we look at the fundamentals, there are non-US companies that want to get US multiple designs of their business to take advantage of the US public capital market.

“The SPAC market has assuredly cooled off a bit, but there are fundamentals that do support at least a handful of very premium acquisitions.”

Meanwhile, Wayne Kimmell, Managing Partner at SeventySix Capital, was highly supportive of private companies utilising the SPAC method as a means of achieving public listing.

SeventySix Capital’s perspective, he said, remains heavily in favour of SPACs as a public listing route, highlighting successful acquisitions such as DraftKings takeover of VSiN and FuboTV’s buyout of Vigtory.

He stated: “For those companies to have an additional way to potentially go public themselves, or be acquired by one of the companies that is going public via SPAC is great for us. The more options that are out there for our private businesses that we are building the better, so we are excited about that, and there are now over 100 sports and entertainment SPACs that are out there looking for targets.”

Referencing Kimmel’s involvement in DraftKings acquisition of VSiN, former William Hill US CEO Joe Asher went on to discuss investor interest in the US market, noting that although there is ‘quite a bit of enthusiasm around the sector’, ultimately the market is ‘still in a formative stage’.

He commented: “Think of maybe the top five operators – which in alphabetical order is Caesars, DraftKings, FanDuel, MGM and Penn – then you’ve got another tranche which includes some very well known companies such as Wynn, PointsBet, Bally’s, Churchill Downs and Rush Street, where that ultimately shakes out I think is very much to be decided.

“I think there’s a lot of investor interest and enthusiasm around the non operator portions of the business as well,” he added, pointing to companies such as GiG Comply. “I tend to really look at those ancillary businesses and try to figure out what the opportunities are around those as much as paying attention to the operators.”

The Industry experts were speaking on the Leaders in Sports Betting Track sponsored by Sportradar at SBC Digital North America, which runs from June 9 to 10, 2021. Get your free ticket by registering at https://sbcevents.com/sbc-digital-north-america/ 

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