Home Outlet store Wynn Resorts is looking to sell online sportsbooks at huge discounts: source

Wynn Resorts is looking to sell online sportsbooks at huge discounts: source

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Wynn Resorts is looking to offload its online sports betting business at a steep discount as the nascent niche faces painful losses from high taxes and expensive promotions needed to attract customers, The Post has learned.

The Las Vegas-based casino giant is quietly buying its Wynn Interactive unit – operator of online gambling app WynnBet – and slashing the asking price to $500m after floating a $3bn valuation a while ago less than a year, a source close to the situation said La Poste.

The fire sale comes less than six months after Wynn publicly plotted a splashy spring launch for WynnBet, signing NBA legend Shaquille O’Neal as a brand ambassador. O’Neal even sold his minority stake in the Sacramento Kings NBA team so he could work closely with Wynn without breaking league playing rules.

Outgoing CEO Matt Maddox has expressed reservations about WynnBet’s customer acquisition costs.
PA

“I am so excited to take WynnBet to new heights,” O’Neal said in an August press release. “Mobile sports betting is having a major moment, and I believe WynnBet will be a strong force in the industry.”

A few months later, in November, however, Wynn said it was abandoning plans it disclosed in May to merge Wynn Interactive with Austerlitz Acquisition Corp. – a blank check company owned by Bill Foley, the billionaire owner of the Las Vegas Knights.

In addition to creating a public company with a valuation of $3.2 billion, the deal would have armed WynnBet with $640 million in marketing cash. After revealing that the app was on track to burn $100 million in the third and fourth quarters, outgoing CEO Matt Maddox signaled that he wasn’t interested in throwing money after the bad.

“The market is really not sustainable right now,” Maddox said in a Nov. 10 earnings call. “Competitors spend too much to get customers. And the economy is just not something we are going to participate in.

DraftKings app displayed on a smartphone with the a logo in the background
WynnBet faces stiff competition from longer established betting platforms like DraftKings.
PA

Shortly after, Morgan Stanley analysts said they valued WynnBet at $700 million, adding that they expected the app to only gain a 2.5% market share north. -American.

Meanwhile, FanDuel and DraftKings, which together control a majority share of the online sports betting market, recently issued credits of up to $1,000 to sign up new members. Caesars also ran aggressive promotions in New York despite a crippling 51% tax rate on online gambling revenue.

On Friday, the New York Gaming Commission said mobile sports betting got off to a good start in its first week, with more than $600 million in wagers taken by Caesar’s, FanDuel, DraftKings and BetRivers. Game analysts said the massive haul was partly the result of “heavy operator promotion”.

Wynn has an online betting license in New York but has not yet launched its service.

“Personally, I’m surprised at the level of promotions we’re seeing given the 51% tax rates,” said Truist analyst Barry Jonas. “I think it needs to wane over the long term if there’s any hope of seeing profitability in the state.”

An advertisement for WynnBet with Shaquille O'Neal
Shaquille O’Neal has sold his stake in an NBA team to avoid any conflict of interest as a WynnBet pitcher.
(wynnbet.com)

That’s a long way since last spring, when online sports betting companies were trading at up to 25 times expected earnings, as tech investors including Cathie Wood’s Ark Invest soared in shares, arguing that the pandemic was about to create an explosion in mobile gaming.

Now, even the most highly valued of them are trading closer to six times. DraftKings, the largest publicly traded sports betting company, went from being worth $50 in May to $40 in November. On Friday, its shares closed at $19.46.

A tipping point, Jonas said, was when DraftKings made an unsuccessful $20 billion bid for British bookmaker Entain in September, indicating it wanted to gain exposure outside the new US market.

Slot machines in a Wynn Resorts casino
Talk about a gamble: It costs up to $500 to acquire an online gaming client, a source told The Post.
PA

A spokesperson for Wynn said the company would not comment on what he called market speculation and rumor. “During our last earnings call, we were clear about the current highly competitive nature of the online sports betting market and our desire to operate this business in a way that will truly create long-term value for shareholders,” he said in a statement to The Post.

Meanwhile, banking sources have said that the most logical suitors for Wynn Interactive, which in addition to WynnBet owns Wynn Slots and BetBull, are Fanatics and Penn Interactive. But neither has shown a clear interest, sources added.

That doesn’t mean a deal won’t happen. David Katz, gaming analyst at Jefferies, notes that most gamers are clamoring for the taxes and the promotions, as punitive as they are, have come as no surprise to them.

An illuminated DraftKings logo
The drop in DraftKings’ stock price should give the industry pause.
PA

“Traders constantly tell us they have the mathematical models that give them the intelligence that they’re spending money wisely — and the street doesn’t believe them,” Katz said. “The way the street sees the future has changed over the last three to six months – there was certainly a lot of excitement but the winds changed quickly.”

Analysts say a key question is whether the big promotions will start paying off soon. Katz estimates that it costs on average between $300 and $500 to acquire an online gaming client.

“I don’t think anyone knows how loyal customers are,” Katz said. “Time will tell who is right.”