Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
Flutter’s announcement last week that it was teaming up with derivatives exchange CME Group drew widespread interest from Wall Street analysts.
David Katz of Jefferies on August 21 wrote that the deal “brings forth discussion on DraftKings evolving, complex prediction markets strategy. Our impression is that much the way Flutter has threaded the needle, DraftKings would likewise progress strategically to manage relationships, regulators, capital consumption, and its existing growth strategies in regulated digital gaming. We consider the predictions opportunity worthy of engagement, but not pivotal to our thesis.”
J. P. Morgan’s Dan Politzer August 20 wrote that “prediction markets are the #1 focus among digital gaming investors, with the debate being whether this quickly evolving, exchange-based product (which is being used as an alternative to traditional betting against an online sportsbook) is more of a total addressable market opportunity for FanDuel/DraftKings or a competitive risk. We think it’s a TAM expansion opportunity, and in the coming months, would not be surprised to see DraftKings follow Flutter’s lead: tiptoeing into prediction markets.”
In an August 20 statement, Truist Securities’ Barry Jonas wrote “regulated operators should tread carefully not to upset state gaming regulators and partners in their core business today. Federal views on prediction could also vary in the future with a different administration in Washington. While we see limited risks in existing online sports betting states from today’s more limited prediction/event contract functionality, we could also see Flutter and DraftKings sporting event products becoming market leading products, too. The risk is more regulated OSB operators getting shut out in states like California and Texas, which currently don’t allow OSB but aren’t able to ban event-based products today.”
Empire Resorts sale
David Lowenstein of Fitch Ratings on August 18 wrote that the sale of Empire Resorts non-gaming assets at Resorts World Catskills to the Sullivan County Resort Facilities Local Development Corporation for $525 million “as a positive credit development that would address its currently untenable capital structure. Fitch’s rating remains unchanged; however, should this transaction close, Fitch would withdraw the rating as there would no longer be debt at the rated entity.
“Genting Malaysia Bhd’s U.S. subsidiary, Empire Resorts, plans to use the proceeds from the sale to purchase 1,554 acres of land from EPR Properties for $201.3 million and redeem Empire’s outstanding $300 million senior unsecured notes due 2026. Empire Resorts will then lease the land, on which the non-gaming assets are located, to Sullivan County until 2066 and operate them under a 20-year management agreement, with options to renew. The restructuring aims to leave Empire debt-free, improve its cost structure by eliminating bond interest payments, lease payments, and secure long-term control over significant land in New York’s Catskills region.”