what you see depends on where you are standing

Redefining the Framework

First Impressions

Leopardstown Selection Best-Price
2 A Case Of You

Source: Stream Snipers.

Kindred and Betsson Resurgent

We pointed out here and here how the market had choosen to focus on the regulatory burden that Kindred Group and Betsson faced in their domestic markets, whilst ignoring the fact that both companies had started to build a foothold in the nascent U.S. betting market. Fourteen months later and those that kept the faith have been richly rewarded, with shares in Betsson up 120% and shares in Kindred Group up 240%.

Companies 16 Jan 2020 8 April 2020
Betsson 42 85
Kindred Group 45 153

PENN Sinks Without Trace

Less than a month ago, on the back of Dave Portnoy's cheerleading, punters were piling into Penn - some buying at around $140. Today shares in the company are trading at around $102. A 37% loss for those that took the plunge. Joining the S&P has failed to ignite interest in PENN and the fact that the company looks like missing out in New York has not helped sentiment. It is going to be a long way back....and there will be many hoping that Portnoy can work his magic and that $102 is the new floor for Penn.

Company 52 WH Price
Penn 140 102

Fox Files Arbitration Suit Against Flutter

A volatile few weeks in the nascent U.S. facing online sports betting market space - saw the bull case becoming unanchored and online betting stocks drifitng significantly away from their 52-Week-Highs. Away from the banter - the big question for the bods at Flutter - having played their FanDuel card too early - is whether they should now attempt to crystalise their gains in the company before the U.S.-based FOX Sports, owned by Fox Corporation, exercises its option to buy 18.5% of FanDuel in July. In December 2020 Flutter said: “We gave Fox the option to acquire a stake in the business in July 2021 at fair market value, and we continue to provide them with that option, and we will be in dialogue with them to see whether they’re interested in pursuing it or not.” Shares in Flutter are now significantly below the level that they were at when the company announced to the market ten days ago that a FanDuel IPO was a possibility - £159 - driven in no small part by the fact that the market has, for now, to some extent fallen out of love with DraftKings (despite further buying by Cathie Wood they remain 12% below their 52-Week-High.).

Flutter has got itself caught in a veritable double bind. The company is being undervalued by the market vis a vis the likes of DraftKings - despite superior performance numbers. The value could be unleashed through a FanDuel IPO. To not do a FanDuel IPO is to open the door to FOX Sports building a bigger position in FanDuel - hence diluting the holding in FanDuel of exisiting Flutter shareholders. To not do a FanDuel IPO is to keep the Flutter share price under pressure and to afford FOX the opportunity to pick up an increase stake in FanDuel at a snip. An altertnative scenario could see FOX move to exploit Flutter's inertia through increasing their own stake in Flutter itself. Nothing is clear and the news that Flutter has been sued by Fox in an attempt by the latter to secure an option to buy into FanDuel at the same price Flutter paid back in December rather than the current market price does not augur well. Flutter says that Fox's legal filing “is without merit” and that it will “vigorously defend its position” in an arbitration process. Ironically, the move by Fox may drive Flutter towards that FanDuel IPO, although it is also the case that no IPO by July, would see investment banks consulted to determine fair value, something that is also unlikely to benefit Fox. The dispute threatens to turn the companies into bitter rivals with Fox likely to move aggressively to promote its own FoxBet service at the expense of FanDuel. It is looking increasingly likely, from a strategic perspective, that in order to protect its own shareholders, Flutter will eventually choose to go down the IPO route so as to unlock and crystalise the hidden value in FanDuel.

FanDuel is amongst four existing New York casino sportsbook partners (the others being DraftKings, BetRivers and Bet365) that at this stage look likely to benefit from the decision by New York to approve a limited-operator, government-bid online sports betting model. Under the proposal, which is set to be passed as part of the state’s $200 billion fiscal year 2022 budget, the New York Lottery will issue requests for proposals from two mobile betting operators, which will then subcontract out licenses to four sportsbook operators. Last week shares in Flutter fell 8.5% on reports that New York Gov. Andrew Cuomo and other lawmakers were at a stalemate over who would operate the system and it looked like the legislation would be timed out. As result of the partnership with the Tioga Downs Casino, FanDuel has a sportsbook license in New York.

The fact that the proposal is only a limited-operator one may not go down well with the market; nonetheless, Jed Kelly at Oppenheimer has reiterated his Outperform rating on DraftKing with an $80 price target: “Well capitalized players with a strong presence in N.J. and large customer data-bases such as DKNG and Fanduel are well positioned” when New York’s plan goes live in late 2021 or early 2022. And on Wednesday it was reported that Cathie Wood’s ARK Invest had bought a further 600,000 shares of DraftKings.

Those that bought into Flutter on the back of the news that they were considering a partial IPO for FanDuel are now nursing a 12% loss. A back of the fag packet calculation, using the current valauation of DraftKings suggests that were Flutter to go down the IPO route their shares have 25% upside. But as things stand the company has lost the plot much to the chagrin of its leading shareholders.

Company 52 WH Price
Draft Kings 73 60
Flutter Ent 170 152

Second Thoughts

Peer-to-Peer Crypto Betting Markets

Augur continues to catch a bid - now trading up 159% since the January lows - but down 11% in the past twenty four hours. Crypto Prediction Markets continue to be impacted by ongoing congestion on the Ethereum network, high fees and a general lack of liquidity. However the Augur project is benefitting significantly from a renewed wave of interest in the Ethereum Ether and the open source Ethereum blockchain. Catchin a bid. #augurreddit

Company Current Valuation
Augur $54

Subject: Prediction Market Crypto/Augur Prediction Markets.

Future Betting Markets

Race Market watch
European Free Sacred
Weatherbys Handicap Stone Circle
Earl of Sefton Maries Diamond
Nell G Isabella Giles
Each Way Cairn Island

Warren Buffett

"Eventually, of course, the party ends, and many business “emperors” are found to have no clothes. Financial history is replete with the names of famous conglomerateurs who were initially lionized as business geniuses by journalists, analysts and investment bankers, but whose creations ended up as business junkyards." .

U.S. Betting Market: A Need To Know Basis