PlayUp is going public on the NASDAQ through a SPAC transaction that values the sportsbook operator at $350 million.
The valuation is $100 million lower than the reported $450 million sale to cryptocurrency exchange FTX that the company alleged former US CEO Laila Mintas sunk. An update from that lawsuit in July suggested Mintas was likely made the scapegoat, according to a court finding.
The new valuation is 9.6 times fiscal 2022’s gross revenue of $36.6 million. That is up 56% from $23.4 million in fiscal 2021.
Rationale for PlayUp deal
IGAC CEO Christian Goode praised the multiple products available via the PlayUp app, including sports betting, daily fantasy, casino games, lottery and more:
“IGAC and PlayUp have the same shared vision: to bring the global online betting industry the most comprehensive suite of traditional and innovative betting products from all over the globe together into one app. The transaction is expected to provide PlayUp with access to fresh capital to continue expanding its vision of a true single destination for the future of online betting.”
IGAC signed a $70 million standby equity purchase agreement with Yorkville Advisors for additional cash after the transaction closes.
Why the discount?
Goode declined to comment to LSR on the ongoing litigation concerning Mintas but did not shy away from a question on the discounted valuation:
“The reality of it is we wanted to get a fair valuation, they wanted a fair valuation, there’s lots of things that go into that calculus. The market’s changed from that time, right? The general, overall stock equity markets have changed. So I think there’s some rebalancing just form a general economic view.”
There is also the benefit to a SPAC deal compared to a standard IPO, he added:
“It’s the desire to be a public company, to be in a position to take advantage of the opportunity, in the relative short term versus a much longer, perhaps more difficult path.”
Deal ends sports betting M&A drought
There have been some huge sports betting mergers and acquisitions since US sports betting started. At the very least, the PlayUp deal shows valuations are less overheated in the sector:
- September 2021: DraftKings tries, but ultimately fails, to buy Entain for $22 billion.
- August 2021: PENN Entertainment buys theScore bet parent Score Media for $2 billion.
- August 2021: DraftKings improved its online casino offerings with the $1.5 billion all-stock acquisition of Golden Nugget Online Gaming.
- September 2020: Caesars announces purchase of William Hill for $3.7 billion in cash.
- January 2020: PENN buys 36% of Barstool Sports for $163 million, with the right to buy the entire company later.
- December 2019: DraftKings says it will go public and buy platform provider SBTech for a combined company worth $3.3 billion.
- October 2019: FanDuel parent Flutter announces it is buying PokerStars and Fox Bet parent Stars Group for $6 billion in stock.
Who could be in play now?
There are still some options for potential buyers on the market.
Churchill Downs announced it was exiting the online sports betting business in February. A company could buy its online market access, which includes states like Illinois, Louisiana, Ohio and Pennsylvania.
PointsBet is a popular name in these conversations as well, especially with its current stock price and its unexpected exit from an NFL sponsorship. The Australia-listed company closed at A$2.05 on Tuesday, down nearly 90% from its all-time high of A$17.62 in February 2021.
Notably, Fanatics said this February it had no interest in any US sports betting companies at their valuations at that time. The company announced a $1.5 billion raise the following month.
PlayUp’s fiscal 2022 results
The investor presentation includes a breakdown of the last four fiscal years of operation for PlayUp.
Handle jumped 89.2% to $402.7 million in fiscal 2022, which ended June 30. That means an 8.8% hold on gross revenue, down from 11% in fiscal 2021.
Net revenue, though, was just $15.3 million, which was up from $15 million in fiscal 2021. EBITDA was a loss of $25.9 million after $41.1 million in total operating expenses.
IGAC pushing PlayUp beyond sports betting
IGAC Chairman Bradley Tusk will be the chairman of the combined company. Goode, meanwhile, will take over as president of US business.
Goode praised Global CEO Daniel Simic, who will remain in his role, for having his hand on the pulse. His visions for the company align with Tusk and Goode’s in looking beyond just sports betting, Goode told LSR:
“When you start looking at betting, not just sports betting but betting in general, the winners and losers are not yet determined. I think there’s a great opportunity to bring their technology platform, particularly in the US but ultimately globally, [which] could be a game changer.
“It’s all proprietary tech, it’s going to allow them to do some things that are super creative so people can bet on what they want where they want to anywhere in the world as long as it’s legal with one wallet.”
What does IGAC get in PlayUp?
According to the investor presentation, PlayUp has market access to 13 more states. This year, it plans to launch sports betting in Indiana, Iowa and Ohio as well as iGaming in New Jersey. An Arizona sportsbook and Pennsylvania online casino are planned for 2024.
The rest of the states are listed as pending. When PlayUp decides to move on these depends on cash flow and the available return on investment, Goode said.
- Illinois: sports betting
- Indiana: iGaming
- Iowa: iGaming
- Louisiana: sports betting & iGaming
- Maryland: sports betting & iGaming
- Mississippi: sports betting & iGaming
- Missouri: sports betting & iGaming
- Texas: sports betting
- Virginia: sports betting through potential partnership
- West Virginia: sports betting & iGaming