In an interview with MarketWatch in 2002, the late Hunter S. Thompson said the only stock he ever bought was the Boston Celtics. But in 2020, perhaps Thompson might reconsider since the hot trend appears to be US online gambling operators becoming publically traded companies.
Everything came to a roaring halt when the coronavirus ravaged the US. Sports and sports betting were all but non-existent. It started with March Madness and then spread like a fever to other leagues. By April, your betting options were Russian table tennis and Belarusian soccer. When the US Supreme Court put an end to the Professional and Amature Sports Protection Act (PASPA), it unknowingly opened the doors to gambling talks inside state capitals.
But in the last few months, it’s not the legalization of sports betting that’s receiving widespread attention, but rather, well-established gaming companies taking their online business public. Online casinos are doing record profits during the pandemic and a few significant companies are pouring investment money into online segments, betting on long-term gains.
However, investing in online gambling can be just as rewarding as betting on the Boston Celtics to sweep the lifeless Philadelphia 76ers. It can also be as dangerous as betting on them to do it again against an even more formidable foe.
Here’s a look at three high profile companies leading the charge.
DraftKings leading the crusade
This all started in April when popular daily fantasy sports (DFS) turned sports betting operator DraftKings (DKNG), debuted on Wall Street. The companies opening price of $20.49 rose to an all-time high of $44.70 and is currently hovering around $38.91 as of 10:26 CT.
The company is known to suck the air out of a room. DraftKings Sportsbook is the leading sports betting operator and whenever it does something as drastic as becoming a publicly-traded company, others pay attention.
In it’s most recent earnings report, DraftKings said, “The company is well-positioned to continue to deliver on its key priorities, which include entering new states at the earliest opportunity, investing in product and technology to create new offerings for American sports — and acquiring and retaining customers.”
We don’t need to sit here and ramble on about the inner workings of DraftKings. The company knows DFS, they know sports betting, they have a huge customer base and the potential to become sports betting/online gambling royalty. They are also in online casinos, now.
The level of success DraftKings has been able to achieve in the two years since the repeal of PASPA is unmatched. But in doing so, it placed a giant target on its back with other operators looking to overtake the behemoth.
Golden Nugget is a leader in online casino gaming
Sometimes, when you reveal a game plan, you want it to be a secret. Like when the Arkansas Razorbacks unveiled the Wildcat formation to utilize their three-headed monster, running backs Darren McFadden, Felix Jones, and Peyton Hillis. Not only did they take teams by surprise, but Arkansas also managed to finish the 06′ season 10-4.
Golden Nugget is the largest online casino in New Jersey and posted a net income of $11 million in 2019. The company also plans to launch online casino games in Pennsylvania and Michigan in 2021.
In a transaction plan similar to DraftKings, Golden Nugget’s online gambling business will be acquired by Landcadia II, a publicly listed special purpose acquisition company (SPAC).
Once the deal is complete, Landcadia II will change its name to Golden Nugget Online Gaming Inc. (GNOG).
The move is genius. What Golden Nugget does best is online casino games. By becoming a publicly-traded company, owner Tilman Fertitta can raise additional funds at a time where COVID-19 has crippled land-based operations.
In football terms, this move screams, we are going to run the ball right down your throat — try and stop us.
Rush Street Interactive taking a page from its rival Draftkings
If it works for your competitor, it just might work for you. That appears to be the mindset of Chicago-based Rush Street Interactive as it too will become a publicly-traded company once its deal with dMY Technology Group is complete.
Rush Street has a tally of first-to-market awards under its belt. It was the first company to launch online casino gaming in New Jersey, and the first to launch online sports betting in Pennsylvania, Indiana, Colorado, and Illinois.
According to the Chicago Business Journal, the transaction value of the combined companies will be around $1.78 billion. Once the transaction is complete, dMY Technolgy will change its name to Rush Street Interactive Inc. (RSI).
The move is not surprising and is a product of a rapidly changing industry looking to compete with top operators like DraftKings and FanDuel.
MGM Resorts and the value of investment
Lastly, we have MGM Resorts and the 10-figure investment from billionaire Barry Diller due to the outlook of online gambling. Diller’s company, InterActive Corp, purchased a 12 percent stake in MGM worth around $1 billion.
In a Fox Business report, Diller said the online gambling industry is worth $450 billion on a global scale, and he has been looking to enter the online space for some time.
The substantial investment helps reinforce the narrative that online gambling is where the industry is heading. New Jersey online casinos recorded $84.9 million in revenue for June. Pennsylvania netted $55.8 million and some market analysts anticipate Michigan’s online gambling value to be worth more than either of them.
The US stock market is extremely volatile and continuously in flux. To that extent, it might be wise to stick with Thompson’s advice and back the Celtics. They swept Philly 4-0 and now take on the defending NBA Champion Toronto Raptors in a best-of-seven series beginning Thursday, August 27.
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