Dec 13: PlayUp legal Snafu nixes FTX deal
PlayUp legal battle, Ohio sports-betting, esports-betting New Jersey launch, Macau week in review, Startup focus +More
Good morning. We start with the court case in Nevada which has apparently caused the failure of a $450m buyout of Australian-based bookie PlayUp by crypto exchange FTX and has seen a temporary restraining order placed on the US CEO. Ohio is set to be the next state that launches sports-betting after a state assembly gave the proposals a pass. Roundhill has some thoughts on DraftKings’ further NFTs push.
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PlayUp legal battle
PlayUp Snafu: The New Jersey-licensed operator PlayUp has been granted a temporary restraining order against its US CEO Laila Mintas for breach of confidentiality, making false statements about the company and its management and causing its sale to cryptocurrency exchange FTX for $450m to fall through. The PlayUp complaint was filed in Nevada and it claims Mintas:
“Made contact with Mr. Sam Bankman-Fried, proprietor of FTX, and advised him that there is a conflict within management of PlayUp, and in so doing has caused the failure of the sale to FTX.”
Cashed up: The complaint also claims that Mintas stated that “FTX made [her] an offer to do something directly with them, and that she believed she could take various licenses with her”. Mintas has until Wednesday this week to file her reply. FTX is one of the top three cryptocurrency exchanges in the world and is the official crypto exchange brand of the MLB. In late October it raised $420m from investors for a valuation of $25bn.
You got me on my knees: Talks between PlayUp and FTX have been proceeding since August over a potential $450m acquisition and apparently came to a head in November when Mintas and PlayUp were re-negotiating employment terms. PlayUp says that during the talks she asked for her salary to be raised from $500k to $1m a year with an increase in her PlayUp shareholding to 15% and that she be appointed global CEO of PlayUp with current global CEO Daniel Simic’s employment to be terminated.
Go direct: When PlayUp refused, the company says Mintas contacted FTX owner Sam Bankman-Fried and made allegations directly to him that “there is conflict within (the) management of PlayUp, there are systemic issues, and that the company is not clean” and that those statements caused the failure of the sale to FTX.
Incendiary language: During the contract negotiations, Mintas allegedly threatened to “burn PlayUp to the ground” and added that “FTX don't even want the (group’s) Australian business.” With the deadline for the FTX sale set for November 27, “the Court can infer that Defendant carried out her threats to harm PlayUp's reputation, standing, and goodwill”. Ross Benson, an advisor to the PlayUp board, stated in his affidavit that Mintas “has sufficient control over PlayUp's technology, records, operations, data, and contracts to enable her to carry out the threats that she is making.”
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All things are possible: Barring disaster, Gov. Mike DeWine will sign the bill to authorize sports-betting in Ohio following the state’s General Assembly vote last week and opening up the seventh most populous state (just behind Illinois in sixth).
Analysts at Eilers & Krejcik said they expect the market to be worth up to $1bn at maturity suggesting the “sports-crazed adult population” will make it “one of the most competitive, productive sports-betting markets in the country”.
A sporting opportunity: E&K say the tax rate of 10% is “ultra-reasonable” though as the team at Regulus Partners suggested, with bonuses not appearing to be tax-deductible, the actual rate is more like 17%. E&K point out that sports teams have won the opportunity to operate sports-betting, meaning there will be more access points for market entrants as well as destination sites for retail offerings.
Campbell, Kenton and Boone: E&K suggest the “relatively populous” counties along the Kentucky/Ohio border near Cincinnati will serve as a “bonus market” and will likely function as feeder markets for Ohio in its early stages. They go on to suggest that is not baked into their $1bn estimates. However, the bears at Regulus suggest such benefits will be counterbalanced by Ohioans no longer traveling to neighboring sports-betting states though they fail to quantify this.
Roundhill on DraftKings NFTs
In the round: DraftKings’ NFT deal with the NFL’s Players Association caught the attention of the team at Roundhill Investments (which included DraftKings in the portfolio of stocks followed by its recently launched MEME ETF). They suggested the continued push into NFTs “remains notable.”
“While the details are light with regard to this week’s NFL announcement, I view the “gamification” aspect as a potential differentiator versus Dapper (they have an agreement with the NFL as well),” said Roundhill.
You may say I’m a dreamer: Suggesting that gaming will be the ‘killer app’ for NFTs, Roundhill invites us to “imagine” an arcade-style NFL game where players own the playable version of Patrick Mahomes as an NFT.
“Now layer on an element of peer-to-peer wagering based on the outcome of a match against another team owner,” Roundhill add. “And then think about the potential to own the platform where the Mahomes NFT is traded from user to user and the platform can take a rake on all transactions and P2P competitions.”
They conclude that “if executed properly”, the potential is there with the DraftKings betting audience to leverage the betting audience’s willingness to take risks. Or something.
Lan with an el: Esports Entertainment has partnered with Hard Rock Hotel & Casino Atlantic City for the first esports wagering event in the US. Entitled LANDuel (pending what FanDuel’s lawyers make of that, perhaps), it is planned as a 256-person tournament which will take place on January 22/23. It will be the first skill-based event approved by the NJDGE. Participants will be able to wager on themselves in each round of the event. Esports Entertainment and Hard Rock hope this will be the “springboard” for more events and a permanent installation at the casino.
Startup focus: SnapOdds
Snap! The computer vision technology behind SnapsOdds allows users to point their phones at a TV screen showing a sporting event and view the latest live odds on the game being shown. The company was founded in 2016 by CEO Thomas Willomitzer, whose previous roles include CTO and co-founder of camera-enabled ID verification firm Jumio. A Super Bowl commercial telling viewers to ‘Shazam’ the song playing in the advert to get access to an exclusive branded-content link “really caught my attention and I thought there needed to be a more convenient and robust way to connect TV and mobile.”
Station to station: The company raised a total of $3.5m from founders and angels including Sharp Alpha Advisors’ Lloyd Danzig and Don Best Sports boss Benjie Cherniak. Its first US client is Station Casinos. Asked whether it made a difference that the group is an offline operator, Willomitzer says in retail the product “increases betting in the sportsbook and casino”, while for online sportsbooks `it's proven to increase the number of live bets placed” and “with sports media, it increases the number of sign-ups and bets placed, which helps tremendously with increasing their affiliate revenue”.
Micro concept: The company signed with Lottomatica in 2019 “as proof of concept” and Willomitzer says both retail deals mean “the offline to online bridge from TV to mobile is essential”. “There's no doubt that sports betting in the US is only at the tip of the iceberg,” he adds. “The monetization of sports media and enthusiasm and team support will shift more and more to in-play, mobile micro-moments where the SnapOdds product line is ideally situated.”
The week in review
Junk rating: Looking at the wasteland that is the Macau VIP business, analysts at Jefferies say the indications are that junket credit will be ended as of Dec 23. This, they add, “presents further complexity for the recovery in GGR once travel resumes and the concessions are resolved.
“The junket/VIP business has been under pressure since before the pandemic,” the Jefferies team added. “With this new wave of crackdown, we expect VIP business could be permanently impaired going forward.”
Wynn win: The most exposed company within Jefferies coverage is Wynn where VIP business made up to 50% of pre-pandemic gaming turnover. However, last week analysts at CBRE said Wynn represented a “contrarian play and special situations” opportunity, saying the company could pivot to be “extremely competitive” in the mass and premium mass segments.
Iowa: November GGR came in at $136.5 mm, up 13.3% versus Nov19 and up 31.2% YoY. Sequentially, it was down 10%. YoY the calendar was unfavorable with only eight weekend days vs. 10 in Nov20. Sports-betting GGR of $19.7 mm was up ~200% sequentially on more favorable results with hold increasing by ~450 bps to 6.9%. Handle for the month was $287.2m, only 2.3% higher MoM. Deutsche Bank said that on an LTM per adult basis, Iowa sports-betting revenue is tracking at ~$48.
Missouri: GGR was up 28.6% YoY to $151.6m, a 4.9% rise on Nov19, again with an unfavorable calendar.
Indiana: Adj, gaming revenue was $183.5m, a 33.5% YoY increase and a 10.0% increase vs. Nov19. For sports betting, handle rose 84% to $463.7m, up 0.6% m/m, while sports-betting AGR was $47.7m, up 88% YoY and implying an overall win rate of 10.3% vs. October’s below average hold of 5.9%. In terms of handle, DraftKings led with 35.8% followed by FanDuel (24%), CZR( 13.6%), BetMGM (10%), and Penn/Barstool/theScore (8.3%). By AGR FanDuel had 33.2%, followed by DKNG (26.4%), CZR (13.8%), Penn/Barstool/theScore (11.5%), and BetMGM (9.4%).
End game: Aspire Global has added online bingo to its B2B product portfolio with a $1.75m investment in the firm End2End, a Buenos Aires and Miami-based online bingo solutions provider. Aspire’s fund injection gives it a 25% share of the firm, with an option to acquire it fully in three to five years’ time. It will sell the new bingo product via its content aggregation platform Pariplay.
Risk factor: Flutter Entertainment’s Risk Committee has been renamed Risk and Sustainability Committee and will focus on material risk management and oversight of the group’s ESG strategy. Flutter has also appointed Atif Rafiq as an independent non-executive director of the committee. Rafiq has previously held senior positions at MGM, Volvo, Amazon and Yahoo!
What we’re reading
Gilded age: The hunt for JP Morgan’s pocket watch.
Vinegar strokes: The rise of Pickleball.
What we’re listening to:
Biscuit barrel: The Gambling Files tackles the Dutch biscuit issue and more.
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Dec 14: Sazka Q3 (earnings call the following day)
Dec 16: New Jersey monthly statistics
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