Bet On It: Standard General proposes to buy rest of Bally’s shares for $15

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space.

SECTOR NEWS: DraftKings (DKNG) unveiled My Stat Sheet, a gaming tool that gives players the ability to assess, track and interact with their personal stats through intuitive charts and information that the company said will help empower players to make data-driven decisions on their own play and therefore promote responsible gaming. This new feature is now available across all DraftKings and Golden Nugget products. Customers can view time spent on the platform, deposits, withdrawals, contest involvement, wagers placed, and net win/loss across monthly, yearly, and lifetime views through charts and filtering options. My Stat Sheet is accessible to all customers through all DraftKings platforms.

Allied Gaming & Entertainment (AGAE) announced a partnership with World Poker Tour WPT and Wynn Macau (WYNN), in which the companies will work together to bring an inaugural WPT event to Macau. AGAE was instrumental in facilitating the collaboration and will assist in the marketing, production, and management of this and future planned WPT events in conjunction with Wynn Macau.

Genius Sports (GENI) and Football DataCo the data rights holder of English and Scottish football, have entered into an exclusive period of negotiation to extend their official betting data partnership. The agreement remains subject to contract and approval of the Leagues and their respective Clubs. Since 2019, Genius Sports has been DataCo’s exclusive supplier of official low latency data from the English Premier League, EPL, English Football League, EFL, and Scottish Professional Football League, SPFL, to the global sports betting industry. The current rights agreement runs until the end of the 2024-2025 season with the new rights cycle being 2025-2029.

SHARE TRANSACTIONS: In a regulatory filing, Boyd Gaming (BYD) disclosed that its co-founder William Boyd sold 125K shares of common stock on March 12th in a total transaction size of $7.9M. This sale came after Boyd sold an initial 125K shares of common stock for $7.91M on March 8. Additionally, Cathie Wood’s ARK Investment bought 302K shares of Genius Sports on Tuesday.

NORTH CAROLINA LAUNCH: ESPN Bet, the official sportsbook of ESPN (DIS), launched in North Carolina as the state’s legal sports betting market opened. Fans in the state now have access to the mobile and web betting platform. ESPN BET, operated by Penn Entertainment (PENN), is now live in 18 states. “We’re thrilled to bring ESPN BET to North Carolina, which marks the first new state launch under our ESPN partnership,” said Jay Snowden, CEO and president of Penn Entertainment. “Together, we’re excited to engage with sports fans across the state and deliver an exceptional sports wagering experience. We commend the North Carolina State Lottery Commission and all of the stakeholders involved in establishing this new legal sports betting market.”

Caesars Sportsbook (CZR) is now accepting mobile sports wagers across North Carolina, the company announced. The full launch of Caesars Sportsbook, the premier sports betting platform operated by Caesars Entertainment, builds on the partnership between Caesars and the Eastern Band of Cherokee Indians. “North Carolina is filled with sports fans who’ve shown us how passionate they are about their teams,” said Eric Hession, president of Caesars Digital. “The expanded launch of our Caesars Sportsbook mobile app serves as an opportunity for fans to get a little closer to the sports they love, and we look forward to providing a best-in-class mobile sports wagering experience to more North Carolinians that pays homage to the sports excellence that is engrained in the state’s history.”

THINK IT OVER: On March 11, Standard General delivered a non-binding letter to the board of directors of Bally’s (BALY) proposing a transaction under which it would acquire all of the outstanding shares of common stock not currently owned by Standard General at a price of $15.00 per share. A filing states: “Standard General expects that the Board of Directors of the Company will appoint a special committee of independent directors to consider its proposal and make a recommendation to the Board of Directors. Standard General will not move forward with the transaction unless it is approved by such a special committee. In addition, the transaction will be subject to a non-waivable condition requiring the approval of holders of a majority of the shares of the Company not owned by Standard General or parties affiliated with Standard General. No assurances can be given that a transaction will be consummated. The Proposal Letter provides that no legally binding obligation with respect to a transaction will exist unless and until mutually acceptable definitive documentation has been executed and delivered with respect thereto.” The filing shows that Standard General owns 23.2% of Bally’s shares. The company’s stock was up 18% following the proposal.

The board of directors of Bally’s formed the special committee of independent and disinterested directors that is authorized, among other things, to evaluate the preliminary, proposal by Standard General, as well as any potential strategic alternatives to the proposal. There can be no assurance that any definitive offer will be made or accepted, that any agreement will be executed or that any transaction will be consummated.

Macquarie noted that this is not the first time Standard General has bid for the company as the investor had previously offered to buy the remaining shares of the company for $38 per share in February 2022. The firm, which continues to believe that Bally’s has a strong portfolio of assets, but adds that “the polarizing issue has been Chicago,” maintained a Neutral rating with a $12 price target on Bally’s shares.

On the optimistic side, Jefferies says the offer to buy Bally’s outstanding shares at $15 by Standard General has a “reasonable likelihood of success.” The stock has been a special situation since Standard General made a prior offer in 2022, and Bally’s elevated balance sheet coupled with the forthcoming capital needs for Downtown Chicago and potentially Las Vegas leave a limited total addressable market of fundamental investors, the firm said in a research note. The firm values the stock at $11 per share, its price target, and reiterated a Hold rating on the name.

STATE UPDATE: According to Jefferies, 24 states have now submitted online data for January. In these states, there was a 22% year-on-year increase in handle, with gross gaming revenue, or GGR, increasing by 42%. This growth was primarily driven by a 1.5 percentage point improvement in sports margins to 10.9%. On a same-state basis, handle and GGR increased by 14% and 33%, respectively. However, the overall market growth rate was impacted by Ohio, where GGR fell by 46% year-on-year due to a challenging comparison with January 2023. Excluding Ohio, same-state handle and GGR growth reached 20% and 58%, respectively. In terms of operators, GGR increased by 79% year-on-year for DraftKings, 33% for FanDuel (FLUT) and decreased by 2% for BetMGM (MGM). FanDuel maintained its lead in market share, with a six percentage point month-on-month increase to 48% . DraftKings’ market share decreased by two percentage points month-on-month to 32%, while BetMGM’s market share remained flat month-on-month at 6%. In Ohio, handle and GGR decreased by 27% and 46% year-on-year respectively, attributed to a challenging comparison with January 2023 when Ohio set a record for monthly GGR. Despite this decline, Ohio’s GGR increased by 31% month-on-month, outperforming the market-wide decline. Moreover, Ohio saw the strongest month-on-month growth in GGR among all reporting states. Regarding promotions in Ohio, there was a modest 9% month-on-month increase in promotional deductions, though variations were observed across operators. ESPN Bet significantly reduced its promotional deductions by 77% month-on-month, while FanDuel increased theirs, resulting in a three percentage point month-on-month increase in GGR market share to 48%.

ADDITIONAL ANALYST COMMENTARY: JPMorgan downgraded Entain (GMVHF) to Neutral from Overweight with a 910 GBp price target. The analyst sees limited visibility over the company’s path to recovery. As the company once again acknowledged persistent regulatory hurdles, primarily influenced by the UK and to a lesser extent by the Netherlands, the firm is growing increasingly concerned about the potential for a deteriorating position in the UK market. This may necessitate substantial investment in both the overall product offering and marketing strategies, JPMorgan told investors.

On the other hand, JPMorgan upgraded Flutter to Overweight from Neutral with a price target of 21,300 GBp, up from 16,300 GBp. The analyst has a more positive stance on the company’s U.S FanDuel brand, for which the firm increased revenue and EBITDA estimates by double-digit percent in fiscal 2026 onwards. With US legalization coming through state by state, JPMorgan feels increasingly confident about Flutter’s total addressable market opportunity crystallizing, the analyst noted.

Morgan Stanley decreased the firm’s price target on Entain to 1,160 GBp from 1,200 GBp and kept an Overweight rating on the shares.

BofA lowered the firm’s price target on Melco Resorts to $8.40 from $10 and reaffirmed a Neutral rating on the shares. The firm lowered its 2024 and 2025 EBITDA forecasts for Melco by 2% and 8%, respectively, on lower forecasts for gross gaming revenue, or GGR, and margin due to increased spending. Sector GGR seems to be back on track in March, but the sector base mass recovery has not been strong enough to propel the GGR recovery to break out from 75% of 2019 level on a sustained basis, suggesting that further upside must come from the “more unpredictable” VIP and/or premium mass groups, the analyst told investors.

Jefferies decreased the firm’s price target on Entain to 1,140 GBp from 1,215 GBp and backed a Buy rating on the shares. Despite another EBIDA cut, the firm retains a positive stance on Entain based on: the downgrade is largely to set aside U.K. marketing investment to spur growth later in 2024; Entain is a leading global gaming operator, with proprietary tech capability; a new CEO appointment is a catalyst to articulate a focus on execution; and valuation sits at the low end of the historic range.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (FLUT), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).