Tuesday, January 19

E-Sports Gain New Behemoth As Bally’s Gets Serious

(Bally’s Atlantic City was acquired by Twin River Worldwide Holdings, which changed its name to Bally’s Corp.)

Bally’s banks on e-sports, online betting

Bally’s Corp. (NYSE: BALY), formerly Twin River Worldwide Holdings, is making an expansive push into the online sports wagering market by acquiring Bet.Works betting technology and partnering with Sinclair Broadcasting Group (NASDAQ:SBGI) for regional sports networks.

Earlier this year, Bally’s entered into a partnership agreement with Esports Entertainment Group (NASDAQ:GMBL), a company based in Malta that offers wagering on e-sports tournaments and leagues.

The Bet.Works acquisition, valued at $125 million, gives Bally’s a range of sports betting platforms and software to reach a growing national customer base that no longer considers gambling on sports taboo.

With four states approving initiatives to legalize sports betting in the Nov. 3 election, half the United States is looking to get a piece of the lucrative online gaming pie, which is expected to grow to $12 billion by 2025 and reach maturity at $50 billion. Bally’s estimates the U.S. sports betting and i-gaming market will reach $2.6 billion this year.

“Owning Bet.Works’ superior technology platform will not only give Bally’s a long-term margin advantage online, but more importantly, will also allow us to evolve our interactive product suite to go where sports betting and i-gaming customers are headed quickly,” Bally’s CEO George Papanier said in a company statement.

Crowded field

The field of betting apps is top-heavy with industry pioneers such as DraftKings (DKNG) and FanDuel, but the U.S. Supreme Court decision in 2018 to strike down the Professional and Amateur Sports Protection Act opened the gates for a host of other mobile betting platforms.

We initiated coverage of Esports Entertainment Group in October with a buy long-term rating and $7 price target. It was trading at $4.07 a share as of Nov. 25.

Esports Entertainment Group offers a versatile and transparent wagering platform and is an emerging leader in the rapidly-expanding $3.6 billion esports video gaming market.

Instead of traditional sports such as football, baseball, hockey and basketball, e-sports bettors put their money on professional players of video games such as Fortnite, League of Legends, Dota 2 and Counter Strike: Global Offensive.

With offices in Rhode Island, EEG is poised to enter the U.S. online sports betting industry through its partnership with Twin River Worldwide Holdings, now Bally’s Corp.

Jeff Cohen, vice president of strategy and investor relations for EEG, said Bally’s acquisition of Bet.Works will not affect his company, which is primarily focused on e-sports.

“Twin River has multiple skins in the game, so this is just one of them,” Cohen said.

Twin River agreed in April to purchase Bally’s in Atlantic City, N.J., from Caesars Entertainment for $25 million, and was approved Nov. 5 by the New Jersey gaming board to operate the casino, committing up to $90 million in renovations that would include a new sportsbook in partnership with FanDuel Group.

Twin River also acquired rights to Bally’s iconic brand in Atlantic City and changed the company’s name to Bally’s Corp. on Nov. 9. The company owns and manages nine casinos in Rhode Island, Mississippi, Delaware, Missouri, and Colorado, as well as a horse racetrack that has 13 OTB licenses in Colorado.

Customer recognition of Bally’s name could add value to Esports Entertainment Group, which plans to launch its online sports betting platform in New Jersey in first quarter 2021.

Esports Entertainment is well positioned to capture market growth. It has online gambling licenses in nearly 150 jurisdictions, a best-in-class wagering platform, hundreds of marketing affiliate partnerships and a strong management team led by CEO Grant Johnson.

In late October, EEG agreed to acquire Helix eSports and ggCircuit in a transaction valued at about $43 million.

“These acquisitions significantly strengthen our three-pillar (growth) strategy, adding state-of-the-art e-sports entertainment centers, an e-sports-focused vertical enterprise software business, a best-in-class e-sports analytics platform, and a player-vs-player skill-based wagering platform to our diversified asset base,” Johnson said in a company statement.

Skillz going public

Skillz Inc., a mobile games platform headquartered in San Francisco, is going public through Flying Eagle Acquisition Corp. (NYSE: FEAC), the same investors behind the special purpose acquisition company that took Draft Kings public in April.

The Skillz platform helps developers build multimillion-dollar franchises by establishing social competition in their games. Skillz connects players in “fair, fun and meaningful competition,” according to the company website.

The transaction implies an equity valuation for Skillz of $3.5 billion, or 6.3 times project 2022 revenue. Estimated cash proceeds from the transaction are expected to consist of Flying Eagle’s $690 million of cash in trust.

Investors led by Wellington Management Co., Fidelity Management & Research, Franklin Templeton, and Neuberger Berman have committed to invest $159 million in the form of a PIPE at $10 per share for Flying Eagle Class A common stock.

“Today we’re a leader in casual e-sports and are well positioned to capture the global e-sports opportunity which will increasingly define the gaming market,” said Andrew Paradise, CEO and founder of Skillz. “Skillz fulfills the human desire for community and competition and is shaping the future of interactive entertainment.”

The gaming industry has surpassed movies, music and books with more than 2.7 billion gamers playing monthly and 10 million developers around the world. Mobile gaming is the fastest-growing segment of the market, expected to increase from $68 billion in 2019 to $150 billion in 2025, according to Newzoo and GlobalData.

While the traditional sports gamers are grabbing the headlines, the “nerds” leading a significant niche rapid-growth opportunity in e-gaming look destined to get their share too.

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Disclosure: I am/we are long GMBL, DKNG, FEAC.

Credit: SeekingAlpha

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