FanDuel Wins July Leg of NJ Sports Betting Race, Mobile App on Deck

FanDuel

New Jersey’s 5 licensed sports-betting operators shared $3.8 million in total revenue during the month of July, the slowest month on the sporting calendar. The FanDuel branded sportsbook at the Meadowlands generated more revenue ($1.3 million, 34%) than any other NJ sportsbook, despite having only been open for 17 days; Ocean Resort Casino was the only other sportsbook in the state to clear $1 million for the month. It should be noted that Monmouth Park, which generated the most revenue during the month of June, experienced a -60% MoM decline in sports betting revenue as the competition has stiffened (see: Meadowlands, DraftKings). 

Howie Long-Short: FanDuel took in more revenue than anyone else in July, but that’s unlikely to be the case in August now that the competition is armed with a mobile app. FanDuel hopes to have their mobile sportsbook (website & mobile app) operational in time for the start of football season. Last month it was announced that FanDuel’s sports betting software will be powered by GAN, a B2B gaming software supplier; IGT technology will continue to power the FanDuel sportsbook at the Meadowlands.

It’s curious that DraftKings is the only sportsbook to have released (on Aug. 1) a mobile sports betting application (outside NV) to date. That will change this fall when MGM Resorts International (playMGM), Caesars Entertainment (Caesers Casino & Sports app) and Resorts Atlantic City introduce their mobile sportsbooks within the state.

West Virginia is getting closer to introducing legalized sports betting and when they do, FanDuel will be a part of it; the company (along with Penn National) was awarded one of the state’s first 2 sports betting permits. FanDuel intends on offering retail, online and mobile sports betting at The Greenbrier.

As for Paddy Power Betfair (PDYPY), the company recently reported a +5% rise in H1 revenue as both its online gaming and sports verticals experienced double-digit growth in Q2 (on albeit soft comps). It wasn’t enough to please investors, shares are down -14% from the close on August 7th (earnings were released on 8th).

Fan Marino: 4 FanDuel’s founders (including former CEO Nigel Eccles) have filed a $120 million lawsuit against the company for “unfair prejudicial conduct” after failing to profit on its $465 million merger with Paddy Power Betfair; a deal that delivered no value to ordinary shareholders (held by most employees), but +/- $30 million to 6 current C-Level executives. Sounds fair.

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Mississippi Becomes 4th State to Offer Legalized Sports Betting, William Hill Partners with 11 MS Casinos

Seal of Mississippi

Mississippi became the 4th state (NV, NJ, DE) to offer legalized sports betting on Wednesday August 1st, with the opening of sportsbooks at the Beau Rivage Casino in Biloxi and Gold Strike Casino in Tunica; properties owned by MGM Resorts International. The newly passed legislation allows for sports fans in the state to place bets on individual sporting events at land or water-based “legal gambling establishments” (i.e. casinos). MS sports bettors who wish to place in-game bets will be forced to visit their local casino as mobile betting will be restricted to those on the casino’s physical premises.

Howie Long-Short: Mississippi Rep. Richard Bennett believes legalized gambling will be a boon to the state’s tourism business declaring, “Mississippi welcomes you. We hope you’ll come, wager on sports betting and see what we have to offer in the Hospitality State”; and he just might be on to something. No other state in the deep South offers legalized sports betting and neighboring Alabama is responsible for more illegal college football bets per capita than any state. Wondering how long will this advantage last? According to Dustin Gouker of LegalSportsReport.com, Mississippi’s advantage (see: no competition) is likely to last “at least a year and feasibly longer”; with Louisiana, Tennessee and Kentucky the states most likely to join the party first.

In addition to MGM, Boyd Gaming (BYD) and Caesars Entertainment (CZR) both own gaming properties in MS. Speaking of BYD, just 2 days after the company announced a market access agreement with MGM Resorts International (MGM), BYD revealed it had aligned with FanDuel Group (PDYPY) to run online and mobile sportsbook operations in the U.S. FanDuel technology will power Boyd Gaming branded online and mobile sportsbook operations, while FanDuel Group will leverage BYD’s 15 state licenses (36% of population) to operate FanDuel branded online and mobile sports betting services in those states; the deal extends to MGM properties in states where mobile sports betting is authorized.

Fan MarinoMGM got out of the gate first in MS, but William Hill has made the greatest inroads, announcing partnership agreements with 11 MS casinos (and another West Virginia). WIMHY, which now operates in all 4 states that offer legalized sports betting, has no intentions of slowing down either; in fact, they recently stated their intentions to add gaming partners in 14 more states, Rhode Island being one of them. The company will offer “operational expertise, risk management and trading data” to support IGT, should their bid be selected in the Ocean State; IGT was the only company to submit a bid to provide sports betting within RI.

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NJ Sportsbooks Post $1.2 Million in June Profits, Meadowlands Sportsbook Opens Tomorrow

FanDuel

The Division of Gaming Enforcement reported that New Jersey sportsbooks took in more than $16.4 million in bets between June 14th-30th, realizing +/- $1.2 million in “clean revenue” (+/-$3.5 million total) over the 17-day span; an impressive figure considering the limited rollout (see Howie below), no mobile/online wagering (due to start July 11th) and just over 2 weeks of operations. The remainder of the +/-$3.5 million revenue total ($2.25 million) accounts for futures bets that have yet to be paid out and winning tickets unclaimed as of June 30th. For comparison purposes, NJ took in over 2x as much money in bets as Delaware ($7 million) did in June – in 3 fewer days.

Howie Long-Short: +/-$1.2 million in “clean revenue” equates to a 7.8% hold, higher than the 5.5% Nevada has averaged dating back to ’92, but significantly below the 14% Delaware reported in June. As Dustin Gouker, Managing Editor of Legal Sports Report, told us earlier in the week, “it’s too early to read too much into the hold. It’s a small sample size and it may simply be lots of bettors that are not terribly savvy, trying to figure out wagering.”

Monmouth Park, operated by William Hill (WIMHY), was responsible for 65% ($2.279 million) of the revenue generated at N.J. sports books in June. The Borgata in Atlantic City brought in just shy of $1 million in profits (28.5%), while Ocean City Resort ($192,000) earned the balance in just 3 days.

The State of New Jersey took in less than $300,000 in taxes, with a land-based casino tax rate of 8.5%; prorated that’s $7.2 million/year. While that figure sounds low (some lawmakers have estimated the state would generate $100 million/annually), consider that just 3 of the state’s 12 potential licensees (9 casinos, 3 horse tracks) are currently operating. Furthermore, licensed operators will soon be able to offer mobile/online betting. It’s expected that “as the market matures”, most of the revenue will come those channels; the state is entitled to a 14.25% tax on those profits.

Fan Marino: The FanDuel Sportsbook at Victory Sports Bar & Club, located at the Meadowlands Racetrack, is holding a soft launch tomorrow morning (July 14th, at 11a). The property should quickly become the state’s most profitable sportsbook, with 15 million people living within 20 miles of the venue and no real competition expected before the end of March Madness ‘19. Remember, Irish bookmaker Paddy Power Betfair (PDYPYacquired majority ownership (61%, grows to 100% in 5 years) in FanDuel back in May; the deal closed earlier this week.

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NJ Becomes 3rd State to Legalize Sports Betting, Betfair U.S. Partners with Meadowlands Racetrack

Paddy-Betfair 200X200

Governor Phil Murphy signed legislation that will allow New Jersey’s 9 casinos and 3 racetracks to take wagers on individual sporting events beginning this Thursday. Gamblers 21 and over will be able to place wagers on a variety of professional and college sporting events, though betting on games involving local college teams (think: Seton Hall, Rutgers) and college games played within the state is prohibited. Initially, wagers will have to be placed in person; though, mobile betting is covered by the bill and will commence in the future (requires licensees to wait 30 days). The William Hill (WIMHY) sportsbook at Monmouth Park Racetrack will begin taking bets at 10:30a on Thursday, just in time for the start of the World Cup later that afternoon. New Jersey becomes just the third state to offer legalized sports betting, following Nevada and Delaware.

Howie Long-Short: Another one of New Jersey’s racetracks, the Meadowlands Racetrack, has found a sports betting partner in Betfair U.S. (subsidiary of Paddy Power Betfair, PDYPY). PDYPY revealed it has signed “long-term agreements for retail and online/mobile sports betting” with the North Jersey track (and Tioga Downs in New York); they plan to begin taking bets later this summer. The news comes just two weeks after the company announced it would be acquiring FanDuel, with the intention of converting their 1.3 million DFS players into true sports bettors. It’s expected that Betfair will brand their U.S. sportsbooks as FanDuel sportsbooks. PDYPY shares are up 11% (to $58.35) since word of the deal first broke on May 15th.

Fan Marino: Monmouth Park officials aren’t satisfied with SCOTUS’ decision to overturn PASPA, they’re now pursuing remuneration for damages caused by the pro sports leagues and the NCAA. The New Jersey Thoroughbred Horsemen’s Association (leases Monmouth Park) claims “the leagues acted in bad faith” fighting them in court, while simultaneously profiting from DFS and authorizing the relocation of several franchises to Las Vegas (nullifying the integrity argument). They’re pursuing +/- $150 million in “revenues we would have had” (from sports betting), between the period of October 2014 – June 2018, had the leagues not opposed their efforts. It must be noted that neither Delaware nor New Jersey included an integrity fee for the leagues in their sports betting legislation.

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Paddy Power Betfair Acquires FanDuel, DraftKings Launches Sports Betting Marketing Campaign

Paddy Power Betfair Acquires FanDuel, DraftKings Launches Sports Betting Marketing Campaign

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Paddy Power Betfair Acquires FanDuel, DraftKings Launches Sports Betting Marketing Campaign

Paddy-Betfair 200X200

Paddy Power Betfair (PPB) has acquired FanDuel (pending final regulatory approval) with the intention of competing in the legalized U.S. sports betting market. The Dublin-based betting operator will bring its modest U.S. assets (worth $612 million) to the table, as well as $158 million in cash; money that will be used to pay down existing FanDuel debt ($76 million) and to fund operations of the new joint business. PPB will merge its U.S. operations with FanDuel’s immediately and will own of 61% of the combined entity; that percentage will increase to 80% after three years and PPB will assume complete control of the company after five years (via call/put options at market price). The newly combined entity now represents “the industry’s largest online business in the U.S.”

Howie Long-Short: This deal came together quickly once legalized sports betting became reality, with news of the deal first reported just a week ago. It’s a good thing that it did, with competitor DraftKings having launched its sports betting marketing campaign (see Fan below). Paddy Power Betfair isn’t collecting DFS companies for sport (they bought DRAFT in ‘17), they’re using M&A to take market share in a sports betting arms race. FanDuel controls 40% of the U.S. DFS market (1.3 million active users) and PPB believes they’ll be able to convert many of those individuals into true sports bettors. The FanDuel brand also brings PPB some value, as the popular gaming operator (in Ireland and U.K.) lacks U.S. name recognition; despite owning the California based horseracing betting business and digital broadcaster TVG and the New Jersey online gaming site Betfair Casino.

It should be noted that PPB’s U.S. operations and FanDuel both lost money in 2017. Together (including expected synergies) it’s expected that they’ll operate at broadly EBITDA breakeven, before investment in sports betting. Paddy Power Betfair trades OTC under the symbol PDYPY. Shares rose 5% (to $61.75) following Wednesday’s announcement and they’re up 17.5% since word of the deal first broke on 5.16.

Fan Marino: As Howie mentioned, DraftKings introduced its sports betting marketing campaign (billboards etc.) to New Jersey residents this week; noteworthy, if only because they’re yet to announce a land based casino operator as partner (as required by state) and don’t have a proprietary sports betting application ready for use (though, they could operate 3rd party software). We’ve known for a while now that DraftKings intends on pivoting from DFS to sports betting. The company hired a Head of Sportsbook, added +/-300 new employees and opened a new office in Hoboken, N.J. (anticipating they’ll be the first state to legalize) all within the last couple months.

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Paddy Power Betfair Close to Acquiring FanDuel, Seeks U.S. Sports Betting Market Share

PaddyPowerBetfair BANNER

Legal Sports Report has reported that Irish bookmaker Paddy Power Betfair (PPB) is close to acquiring FanDuel. Little is known about the deal’s terms, but “it (the price point) appears likely to be below the $1 billion valuation” that the company held in July 2015. PPB acquired FanDuel competitor DRAFT for +/- $50 million in May 2017, so should the deal go through PDYPY would own the 2nd and 3rd most popular DFS apps. The news comes just one day after the SCOTUS struck down PASPA, the federal ban preventing individual states (save Nevada) from offering betting on the outcome of a single sporting event; FanDuel CEO Matt King indicated earlier this month, that his company would “get into sports betting” if the courts voted in New Jersey’s favor (as they did).

Howie Long-Short: Paddy Power Betfair isn’t collecting DFS companies for sport, they’re using M&A to take market share in a sports betting arms race. FanDuel has a database that contains 6 million DFS users (not all active) and PPB believes they’ll be able to convert many of those individuals into true sports bettors. The FanDuel brand also brings PPB some value, as the popular gaming operator (in Ireland and U.K.) lacks U.S. name recognition; though it does own California based horseracing betting business and digital broadcaster TVG and the NJ online gaming site Betfair Casino.

FanDuel raised $430 million in venture funding, but has struggled to raise additional capital since Q3 ‘15; so, investors were pushing to either pursue a sale or public offering. In March, we reported FanDuel was considering a reverse merger as a means of capitalization. Those talks would appear to be on hold. While that means you won’t be able to purchase shares of FanDuel on the NASDAQ (as Platinum Eagle had planned), you can buy stake in Paddy Power Betfair. The company trades OTC under the symbol PDYPY. Shares are up 7% since the SCOTUS decision, but declined 4.5% on Tuesday following the Legal Sports Report’s report.

Fan Marino: DraftKings maintains the No. 1 position among DFS companies, claiming more than 10 million users. Interestingly, their fastest growing game (+59%) isn’t tied to the NFL, NBA or MLB, but to League of Legends; where users construct rosters (with a salary cap) of professional gamers. It’s not just DFS players getting into esports though, global wagering (includes legal and illegal) on esports is expected to top $6.7 billion in 2018 and hit $13 billion by 2020. Looking to get in on the action? Pinnacle Entertainment (PNK) and William Hill (WIMHY) both take bets and offer odds on esports, as does Unikrn; a website that allows for legal esports betting using their own virtual token (Unikoin Gold, UKG) or cash. Unikrn has raised $41.4 million to date, including $31.5 million in a H2 ‘17 ICO; Mark Cuban participated and has a seat on the company’s advisory board.

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SCOTUS Strikes Down PASPA in Historic Ruling, Legalized Sports Betting to Spread Nationwide

Scotus

In a historic announcement, the SCOTUS ruled (6-3) to strike down PASPA; the national law preventing individual states (save Nevada) from offering betting on the outcome of a single sporting event. Justice Samuel Alito wrote, “Congress can regulate sports directly, but if it elects not to do so, each state is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.” The ruling effectively places the decision to authorize sports betting in the hands of the individual states. Several have already passed legislation (NJ + PA, CT, WV & MS), with upwards of 27 others expected to offer wagering on sporting events within 5 years. It’s important to note that federal law prohibits wagering across state lines, so gamblers will have to be physically located in a state that has passed sports betting regulation to legally place a bet on a game; even with online and mobile betting available elsewhere in the country.

Howie Long-Short: A fall ’17 study by Eilers & Krejcik estimated that if sports betting were to be legalized on a nationwide basis, it would generate $7.1 billion annually in new revenue at casinos & racetracks. That figure grows to $16 billion per year, when you count the revenue generated from gaming websites and mobile apps; so, it’s easy to understand the enthusiasm surrounding the announcement. Interestingly, English bookmakers William Hill (WIMHY, +14.39% to $17.73) and Paddy Power Betfair (PDYPY, +12.56% to $55.20) were Monday’s biggest winners; though, Scientific Games Corp. (SGMS, +11.15%), Stars Group, Inc. (TSG, +8.97%), Caesars Entertainment Corporation (CZR, +5.46%), Churchill Downs, Inc. (CHDN, +4.87%), Penn National Gaming (PENN, +4.68%), Boyd Gaming (BYD, +3.06%), Pinnacle Entertainment (PNK, +1.88%) and MGM Resorts International (MGM, +1.64%) all finished up on the day as well.

We’re not surprised that William Hill (WIMHY) had the biggest pop among the companies listed above, as we told you on April 24th that no European gaming company was better positioned to capitalize on legalized sports betting, in the United States, than they are. Back in ’13, the company bought the rights to run the sportsbook (and split profits 50/50) at Monmouth Park (NJ), if ever permitted by law, for $1 million; a remarkably shrewd investment considering the minimal capital investment required and the potential payoff they’ll now realize (+/-$750 million/year in sports betting revenue). The company has since announced plans to add a 2nd $5 million sportsbook on the premises. WIMHY will be the first sports book in NJ to accept bets, with Monmouth Park expecting to open its doors within 2 weeks; though residents in Mississippi, Delaware and West Virginia can all expect to be able to place bets at their local casinos by the first Sunday of the NFL season.

Fan Marino: MLB put out a statement saying the decision would have “profound effects” on the sport, but no one is more bullish on legalized sports betting than Dallas Mavericks owner Mark Cuban. Cuban believes that “everybody who owns a top-four professional sports team just basically saw the value of their team double at least.”

I asked SportsHandle.com Editor-in-Chief Brett Smiley for his thoughts on Cuban’s remarks?

Brett: Cuban’s guesstimate strikes me as a bit of an exaggeration, but there’s wide recognition amongst the leagues and owners that legal sports betting will increase ratings, increase revenue and create more opportunities. Sports bettors are more engaged and for longer periods of time. There will be other opportunities to sell data, partnerships, sponsorships and so forth.

It sounds like an exaggeration to me too, but if $300 billion were to be wagered annually and the leagues got their 1% “integrity fee” on a nationwide level (highly unlikely); they would be splitting $3 billion annually. Divvy up that newfound revenue between +/- 120 pro sports franchises and you’re adding $25 million in profit to each team’s bottom line. The Mavericks only generated $21 million in operating income last season. Sure, that’s a bunch of “ifs”, but once you add in all the other revenue streams that Brett referenced, Cuban may not end up being too far off.

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FanDuel Confirms Plans to “Get into Sports Betting”, Verizon Flying Under Radar

FanDuel

FanDuel CEO Matt King confirmed in an interview with Fortune that should SCOTUS strike down PAPSA, the company would “get into sports betting.” The announcement comes just two weeks after the NBA said it would look to divest equity interest in the DFS operator and 2 months after news broke that the company was in “advanced talks” to partake a reverse merger. It was suspected at the time, that the company would use a capital infusion to position itself to capitalize on legalized sports betting. No updates have been released as it relates to negotiations.

Howie Long-Short: We told you on April 23rd, that the NBA divesting its interest in FanDuel was the latest sign of the company’s intention to pursue legalized sports betting. The NBA has been outspoken about its desire for an “integrity fee”; they can’t sell an increased role in regulation and serve as the book, with an interest in winners/losers.

While not too late (a decision may not occur until the end of June), FanDuel has some catching up to do. As we’ve noted over the last several months, rival DraftKings has been aggressively positioning itself (increased staff by 75%, hired Head of Sportsbook, seeking casino partners) for a similar pivot; and DRAFT, owned by Paddy Power Betfair (PDYPY), is also expected to chase a share of the U.S. sports gambling market. Those 3 new entrants will face strong competition from established gaming operators like William Hill (WIMHY), Caesars Entertainment (CZR), MGM Resorts International (MGM), Penn National (PENN), Boyd Gaming (BYD), etc.

Fan Marino: There’s another potential new entrant to the sports betting space, well positioned and flying quietly below the radar; Verizon Communications (VZ). The company owns Yahoo! (AABA) and its popular season-long fantasy sports business (they also have DFS, though less users than DraftKings and FanDuel) and like those companies (and Draft), could convert tens of millions of players into gamblers. VZ also owns both NFL and NBA streaming rights, giving them the ability to broadcast games and offer in-game betting within the same application; a significant advantage over the competition.

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Reverse Merger Could Take FanDuel Public

FanDuel

FanDuel, Inc. may be going public, but it won’t be through an IPO. The DFS company is in “advanced talks” with Platinum Eagle Acquisition Corp. (EAGLU) to partake in a reverse merger; an expedient and cost effective way for a private company to trade on a public exchange. No details have been released relating to the equity percentage EAGLU would acquire or the valuation FanDuel holds; though, the company calculated its fully diluted value to be $1.2 billion in 2017. One can speculate FanFuel will use the capital infusion to position itself to capitalize on legalized sports betting; the company owns an extensive database of DFS players that it could convert into mainstream sports gamblers.

Howie Long-Short: EAGLU is a special purpose acquisition company, formed by well-respected media execs Jeff Sagansky (Sony, CBS, Scripps Networks Board Member) and Harry Sloan (MGM, SBS Broadcasting, Lionsgate Board Member). The publicly traded company launched in January, having raised $325 million to acquire another business (or businesses). As for FanDuel, they’ve raised +/-$435 million to date; but, none since April ’16. A reverse merger is another way for the company to raise the capital it needs.

Fan Marino: FanDuel won’t be the only DFS company to enter the sports betting space. DraftKings announced last week that it had hired a “Head of Sportsbook”, and DRAFT, owned by Paddy Power Betfair (PDYPY), is also expected to chase a share of the U.S. sports gambling market. Of course, all 3 will have strong competition from established gaming operators like of William Hill (WIMHY), Caesars Entertainment (CZR), MGM Resorts International (MGM), Penn National (PENN), Boyd Gaming (BYD) etc.

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