Analysis: Is Genius Sports A Takeout Target As Market Cap Drops?

Written By

Updated on

Genius Sports

Genius Sports sank below a billion dollars in market cap last week, as the company saw a continued selloff despite strong Q4 revenue growth.

Genius quarterly revenues grew 79% year-on-year to $84 million, according to its Q4 earnings report.

Group adjusted EBITDA was -$12.5 million, driven by “accelerated investment in the business.”

Heavy losses for Genius Sports

For the full year, Genius losses were a massive $604.5 million. That was driven by nearly $500 million in stock-based compensation as it booked some of the cost of warrants given to the NFL as part of its official data deal

Genius said it would post positive group adjusted EBITDA of approximately $15 million in 2022. However, some analysts questioned the value of that number when it does not include the cost of stock-based compensation. 

Genius shares fell around 8% to $4.50 following the print and are down 78% over the last year. That equated to a market cap of $978 million as of Monday morning. 

Buy or be bought?

However, the share price dislocation could spur M&A from both angles.

Genius chief commercial office Jack Davidson told analysts last week:

“There’s a lot of opportunity in the market. There’s obviously been some quite significant price corrections in lots of different ways. And that provides opportunity, frankly.

“So, we’re open, we’re working hard, we’re assessing opportunities. We’ll study and we’ll be opportunistic,. But there’s nothing specific that’s worth updating in terms of individual targets.”

Low cash on hand

Genius has about $222 million on the balance sheet at the moment. 

Conversely, the company’s shrinking market cap might attract takeover bids as well.

Could an operator, supplier or even a sports league acquire Genius?

Takeover target

One analyst says the glitziest Genius partner is not a prime candidate.

“I think it is unlikely the NFL takes a swing at them,” said Ryan Sigdahl, an analyst at Craig-Hallum. “It is too diverse a business with all the other leagues covered by Genius. I doubt the NFL would want to manage 200,000 other sporting events around the world. Those sports are needed to add scale and help cover fixed costs of the business (tech, distribution, etc.).

“Could another B2B supplier be interested? I think they should be. Would $GENI be interested in selling here? I doubt it.”

Sigdahl has a buy rating on the company and a $17 price target.