eResearch| Score Media and Gaming Inc (TSX: SCR | NASDAQ: SCR), “theScore“, recently began trading on the NASDAQ following the issuance of 6 million shares at $27 each – raising a total of $162 million.
The proceeds will be used, in part, to fund the expansion of theScore Bets – the odds-making and bet-taking arm of the media company.
Combining fan interaction through betting and content generation, such as score reporting and sports content, theScore has a complete offering unlike other options on the market.
Sports Betting
Listing of theScore on the NASDAQ adds to a growing number of gambling investment options.
Once the domain of back rooms and Las Vegas bookmakers, sports betting entered unexpected national legality following a U.S. Supreme Court decision in 2018. Sports betting is considered a game of skill rather than luck.
Online sportsbooks with questionable legality eroded the practical effectiveness historical geographical restrictions on sports betting.
Digital betting enabled punters to place bets anywhere, creating significant marketplaces for bookmakers to offer exciting and specialized propositions.
The global sports betting market topped $200 billion in 2020, according to Statista. Technavio estimates a CAGR of almost 10% over the next four years. Investment returns could outstrip revenue gains as the fragmented industry consolidates.
The Sports Betting ETF (NYSEARCA: BETZ) offered by Roundhill Investments is up 99% year over year as of March 12, 2021.
Several industry concerns remain outstanding, such as quantifying customer lifetime value, how fickle betters are to bookies, and how to remain socially responsible in a digital data-driven ecosystem that could prey on human foibles.
theScore
Headquartered in Toronto, theScore engages sports fans through media and betting products. North Americans make the bulk of theScore‘s mobile application and digital media users.
Currently, theScore accepts bets in New Jersey, Indiana, and Colorado and is planning on continued expansion.
Over the most recent quarter, theScore recorded C$8.5 million in revenue and logged a net loss of C$12.7 million. COVID-19 related live sports interruptions likely played some part in revenue decline over the same period in 2019.
Sports betting is an emerging legal market, and firms are spending to claim market share. With theScore app already on millions of devices, attracting customers might be easier compared to competitors.
DraftKings
Fernando Tatis Jr. signed a mega-deal and is now worth hundreds of millions, but “players” in the sports betting market, such as the CEO of DraftKings (NASDAQ: DKNG), Jason Robins, are aiming for the billion-dollar territory.
One the largest sports betting companies, DraftKings, logged a net loss of $843 million on $614 million in revenue. Why is this good news? Year over year revenue jumped 90.1%.
Revenue gains translate into the share price. As of March 11, 2021, DraftKings is up 631% since it began trading in July 2019, commanding over a $28.5 billion market capitalization.
DraftKings offers a suite of related products, including sports betting, iGaming (online casino), and fantasy sports games.
Arizona Coyotes
It seems like loss-making and sports betting are going hand-in-hand in the early stages.
Arizona Coyotes owner Alex Meruelo must be disappointed in both a $17 million loss and a first-round exit in the 2019-2020 NHL season.
But new Arizona legislation in the works might make it possible for the casino owner to provide betting services to fans its Glendale’s Gila River Arena. A valuable benefit to owning the loss-making Yotes.
Fans of teams near their salary caps could celebrate too, as hockey-related revenue could let teams sign big named free agents in the coming years.
Final Thoughts
Methodical value investors and gambling do not typically go together. It is as unlikely as Leicester City winning the Premier League in 2016. However, improbable events still happen, and sports betting investments add a new flavour and healthy returns to many portfolios.
