There is an economic shift happening. First, it began with the fall of the Professional and Amateur Sports Protection Act (PASPA) in May 2018. When the act was struck down, it released sports betting to the masses on a state-by-state level.
But it did something more. It allows companies like DraftKings and FanDuel, which, at the time were strictly daily fantasy sports companies, to pivot their business models to allow sports betting. The infrastructure was there, the user base was there, and with the flip of a switch, some fantasy sports players started becoming sports bettors.
Then, the economic gears started turning. What if an online gaming company, with no physical presence, became a publicly-traded company?
In the past, gaming stocks were dominated by the casino business. Las Vegas Sands, Wynn Resorts, Caesars Entertainment are the big names, the big brands that dominate Wall Street.
That was until DraftKings took its online gaming business and transformed it into a publicly-traded company.
Mergers and acquisitions aren’t the sexiest things to talk about. But it’s essential to examine what gaming stocks used to be and how they have evolved.
Will the online gambling IPO trend ever stop?
Chad Beynon, senior gaming and lodging analyst with Macquarie Research, anticipates a reduction in the number of online gaming companies going public.
“We have looked at mature markets like the UK and Australia, and in those cases, there are four or five winners then you have a number of different players like Italy and other European markets,” Beynon told PlayUSA in an interview. “Most expect the US to have five major winners and then everyone else.”
At Macquarie, where Beynon has spent the last 14 years as a Wall Street analyst, he describes the power hierarchy of the online gambling market as a tiered structure.
“If we look at the big land-based companies in the US, you have MGM, Penn National, and Caesars Entertainment. They are the big three in terms of revenue and profit. They all have a really robust online strategy.”
“Then look at the next tier, Wynn Resorts, and Las Vegas Sands. Then the next tier – Boyd Gaming, Churchill Downs. It sounds like everyone wants that [robust online] strategy.”
As Beynon explained, sports betting companies will secure around 10% of the market share. So if each of the operators mentioned above secures its portion of the kingdom, what is left?
“It’s all about omnichannel, consolidation of points with online options. You see it in the hotel and airline industry, where you can redeem your points for other things. You have the omnichannel being married up with the media companies, podcast, tv, or even the print space.”
Although the US might be hitting its market cap — interns of the number of sports betting companies — Beynon believes data and technology companies, which are more B2B, still have a role to play.
We may never see a new casino company emerge or a new sports betting company pop up. But what we will see is these entities grow and gobble up each other in a play for domination. As Beynon put it, there will always be room for data companies. The company that can catalog and disperse information like betting lines the fastest will continue to succeed.
“There are more companies, there are the tech companies, data companies, etc., they can become public with better margins and get a piece of all revenue,” he said. “But from a B2C like DraftKings & Co., at one point, there will be a reduction. The end of new sports betting companies might be soon, but data companies can still arrive.”
The PlayUSA Merger & Acquisition Tracker
To catalog all the moving pieces in the ever-changing gambling landscape, PlayUSA has created this tracker to help provide some order to the chaos.
Not every deal is listed below. Instead, we considered the brand name, market value, and wide-spread reach and curated a top-10 list of the most impactful M&A deals over the last few years.
- Diamond Eagle Acquisition Corp. acquires DraftKings + SBTech: the original seed, the one that started it all. DraftKings and SBTech were acquired by Diamond Eagle for a massive $2.7 billion in cash and stock. Since then, online gaming operators have been trying to replicate DraftKings’ success.
- Penn National Gaming acquires stake in Barstool Sports: for $163 million in cash and stock, Penn National acquired a 36% stake in Barstool. Additionally, after three years, the ownership stake increases to 50%. Penn CEO Jay Snowden said the acquisition was part of a strategy to evolve into a “best-in-class” omnichannel betting and gaming operator.
- Caesars Entertainment acquires William Hill: the deal gave Caesars a unified wallet and customer experience across online casino and sports betting operations. It also ensured broader market access for Caesars and the ability to cross-sell 60 million customers Caesars’ rewards. All this for $3.7 billion in cash.
- DraftKings acquires Golden Nugget Online Gaming: the acquisition would help DraftKings reach iGaming customers who don’t bet on sports, said DraftKings CEO Jason Robins. The $1.56 billion all-stock deal will also make Golden Nugget CEO Tilman Fertitta one of the largest DK shareholders when the deal closes in 2022.
- Flutter Entertainment becomes the majority owner of FanDuel: in 2018, Flutter Entertainment — then Paddy Power Betfair — allocated its US assets plus $158 million in cash for a 58% stake in FanDuel. Two years later, the company spent $4.2 billion to buy up the remaining 37% — Boyd Gaming owns the remaining 5%.
- Bally’s Corporation makes an agreement with Sinclair Broadcast Group: in a deal worth $85 million over 10-years, Bally’s was able to rename the 21 Fox Regional Sports Networks to Bally’s Sports. The company is also allowed to integrate content into the 190 television stations owned by Sinclair.
- Penn National Gaming acquires Score Media and Gaming Inc.: theScore is the third most popular sports media app in North American and the No. 1 in Canada. For $2 billion in cash and stock, Penn National further strengthens its media and gaming strategy.
- Caesars Entertainment merges with Eldorado Resorts: the combined portfolio accounts for 60 properties in 16 states, with the deal valued at $17.3 billion. The merger centered on sports betting and online gaming and, when combined, expanded to seven states and counting.
- Bally’s Corporation acquires Monkey Knife Fight: Bally’s set out to become the first “truly vertically integrated” online gambling company in the US. Part of that strategy meant offering sports betting, online casino gaming, and daily fantasy sports. The acquisition of the fantasy sports operator only cost $90 million in stock.
- DraftKings acquires Vegas Sports Information Network, Inc. (VSiN): what can $100 million get you — how about 18 hours of live sports betting content a day broadcasted through video and audio channels including Comcast Xfinity, Sling TV, FuboTV, iHeartRadio, and TuneIn.
This is a revolving door that could see companies move up or down depending on future deals.