Not one, but two announcements about changes in operator ownership structures have come on the heels of the launch of New York sports betting. Yesterday, Bally’s Corporation got a $2 billion offer to take its company private.
This was preceded by the news that Wynn Interactive is now up for sale, with an asking price of $500 million.
Both WynnBET and Bally Bet have market access to the Empire State, but neither has yet launched. That timing may not be a coincidence.
New York is proving to be a large-handle state, but also very competitive for operators regarding marketing and promotions. Carving out market share may drive up customer acquisition costs (CAC). Making matters worse is the state’s exorbitant 51% tax rate.
BetMGM, a major rival for both WynnBET and Bally Bet, just noted that investors want to see those costs become more rational.
The appeal to Bally’s of going private
If Bally’s does go private, it no longer has to meet those investors’ earnings expectations. The purchaser would be New York-based Standard General, which is already Bally’s largest shareholder at more than 20% of its stock.
That said, it’s unclear if Standard General’s motive is in fact to alleviate pressure from shareholders. Today, Soohyung Kim declined to comment for Online Poker Report. He’s masterminding the deal as both the chairman of Bally’s board of directors, and managing partner and chief investment officer of Standard General.
However, that scenario seemed to have more credibility after Kim said Bally Bet wouldn’t launch until April. Right now, New York’s promotional environment is “insane,” Kim said, as reported today by OPR sister site Legal Sports Report.
Waiting may save on marketing costs. It may also be simpler to get all parties to agree on a price before rather than after launching in such a volatile environment.
Soo Kim’s proposal
Kim, who usually goes by the nickname “Soo,” signed the letter of interest on behalf of Standard General.
He wrote the proposal to Rhode Island-based Bally’s that was included in yesterday’s filing with the US Securities and Exchange Commission (SEC).
Kim said in the proposal:
“Standard General is pleased to submit this proposal (our “Proposal”) under which we would acquire all of the outstanding shares of common stock of Bally’s Corporation (“Bally’s” or the “Company”) we do not own for a price of $38.00 per share. Our Proposal represents a premium of 30% to Company’s closing price as January 24, 2022, which we believe offers compelling value to Bally’s stockholders.
“Our proposed transaction would allow the Company’s stockholders to immediately realize an attractive value, in cash, for their investment and provides stockholders certainty of value for their shares, especially when viewed against the operational risks inherent in the Company’s business and the market risks inherent in remaining a public company.”
On Jan. 24, the market crashed and recovered. So some stocks may have been undervalued. On that day, Bally’s stock sold for a low of $26.39. However, that price represented a steady decline from last year’s values that were nearly double that amount.
The proposed $38 share price will bring Bally’s stock back to its New Year’s levels. The company’s value dropped after Bally Bet wasn’t among the four NY-licensed online sportsbook operators to begin taking bets immediately on Jan. 8.
Today, Bally’s stock was selling for over $36.50 mid-day.
Bally Bet launches are slower than others
If Bally’s does wait until April to launch Bally Bet in New York, it would fit the company’s style.
As of today, Bally Bet is operating online sportsbooks in four states. It wasn’t a day one launch for any of those.
Even though Kim told OPR last year that Bally Bet would offer iGaming, that hasn’t yet happened.