Wynn Interactive is no longer going public as the company pivots its US sports betting strategy.
The online gaming arm of Wynn Resorts was due to list via a SPAC deal announced back in May.
However, Wynn announced Friday that the deal with Austerlitz Acquisition Corp has been terminated.
Why Wynn shifted on SPAC
For one, Austerlitz was investing around $640 million to fund marketing and advertising. Now Wynn does not plan to spend that cash, so why give away equity?
Wynn would have owned a 58% stake in the combined company, worth an estimated $3.2 billion.
Of course, that valuation was first mooted back in May when the SPAC market and sports betting stock were a lot hotter.
DraftKings stock is down some 42% from its highs earlier this year, while Penn is down around 57%, even as the wider market makes all time highs.
In that context, the deal likely looked less attractive for Austerlitz too. Austerlitz is led by billionaire investor and Vegas Golden Knights owner Bill Foley.
What new Wynn CEO said
A Wynn statement left things a little vaguer, however.
Interactive CEO Craig Billings said Friday:
“With our continued roll out of product features and planned new state launches, including New York, we remain excited about WynnBET’s future. As we discussed on the Wynn Resorts third quarter earnings conference call earlier this week, in light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy.
“In so doing, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022. WynnBET’s best days lie ahead of us.”
Why is Wynn Interactive pivoting?
WynnBet is on track to burn around $100 million in cash in both Q3 and Q4. And that investment was apparently not delivering the expected returns.
“The market is really not sustainable right now,” said outgoing Wynn CEO Matt Maddox at Q3 earnings on Tuesday “Competitors are spending too much to get customers. And the economics are just not something that we’re going to participate in.”
Wynn said it would cut spending in 2022 and focus on acquiring profitable customers. That will likely hurt market share in the near term.
Wynn said instead it would look to its database and brand as the foundation of its US sports betting strategy going forward. As such, Wynn may position itself as a place for high-rollers and VIPs rather than competing for recreational customers.