MGM Resorts shares jumped 13% Monday on news that digital media giant IAC has built a $1 billion dollar position in the casino brand, on the back of its online gambling potential.
The $1 billion stake is equivalent to around 12% of the shares in MGM.
IAC called the investment a “once in a decade” opportunity. Specifically, IAC highlighted the regulatory mechanisms that tethered online gambling sites to retail properties, giving incumbents a massive advantage.
MGM is on board too
In a statement, MGM welcomed the investment and said it would invite IAC to join its board.
CEO Bill Hornbuckle said it was a natural fit as MGM looked to enhance its online sports betting and gaming products.
The investment will also be welcome news for MGM’s JV partner GVC. Both companies recently upped their investment in the JV, pledging to spend “whatever it takes” to make BetMGM a market leader in US online sports betting.
The deal also reflects the growing appetite among US investors for online gambling exposure. That has led to the recent surge in reverse listings from companies like Golden Nugget and Rush Street Interactive.
Who is the new MGM investor?
IAC, led by media executive Barry Diller, describes itself as a “builder of online companies”. The group has previously helped build companies like the Daily Beast, Investopedia and Vimeo.
It also spun out the online dating giant Match Group earlier this year.
IAC said it would offer its experience in e-commerce to MGM as it built out its online gaming product. What would that look like?
To take one example, IAC said it “love to help” MGM optimize its funnel of MLife loyalty customers and attract new digital-first audiences.
Online and offline synergies
“MGM pairs a strong physical presence and brand with talented online sports betting sites in a fast-growing joint venture [Roar Digital] in online gaming,” IAC said in a letter to investors.
The company compared MGM to Disney in that its physical presence gave it an advantage over pure-play rivals with “multiple avenues to monetize the same intellectual property”.
That could be using the same sports betting odds online and offline, or cross-selling MLife loyalty customers into online casino.
IAC added:
“MGM, with its highly capable joint venture partner GVC, has only just barely begun to deliver these products. Although we would never ‘bet the company,’ we know that this is a large bet for IAC.”
