Publication date: May 12, 2021, 11: 46 h.
Last updated: May 12, 2021, 12: 09 hrs.
It's only been two days since Wynn Resorts (NASDAQ: WYNN) unveiled plans to merge its online gaming business with a special purpose acquisition company (SPAC) to take the unit public, and some analysts are already enthusiastic about the possibilities.
Wynn Interactive is merging with Bill Foley's Austerlitz Acquisition Corp. I (NYSE: AUS), laying the groundwork for the former to become a freestanding public company this year. Wynn's online casinos and sports betting division will trade on the Nasdaq Stock Market under the ticker "WBET."
While online gaming stocks are being punished as value growth rotation accelerates, Wynn Interactive continues to come out with optimistic commentary.
"Overall, Wynn Interactive has market access to 15 states covering 51 percent of the U.S. population and aims to gain access to 77 percent of the U.S. population in the near term, " according to UBS.
"Wynn reports a combined addressable market of $45 billion iGaming and sports betting market in North America, along with DraftKings and BetMGM, with Wynn interactive targeting 10 percent to 15 percent long-term market share and 25 per cent to 30 percent earnings before interest, taxes, depreciation and amortization (EBITDA) margins, "says UBS.
By separating his online business, Wynn is creating an entity dedicated to iGaming and sports betting - a welcome feature in the investment community.
Wynn Interactive Risk / reward profile
Under the terms of the agreement with Austerlitz Acquisition, Wynn Interactive will own 79 percent of the new company.
Las Vegas-based Wynn Resorts will control 58 percent of that total. This means that its investors are participating in the monetization of the online business and that the parent company will have assets with growth potential on its balance sheet.
"WynnBET is now live in 6 states with over $ 100 million in gross gaming revenue. Wynn expects the combined company to be worth $3.2 billion upon completion of the transaction, which is 4.5 times the company's projected 2023 revenue of approximately $710 million, " UBS added.
However, there are some risks to consider. As a Stifel analyst pointed out Steven Wieczynski in a note to customers on Tuesday, Wynn's database of U.S. players is small compared to its rivals. More domestically focused affiliates use player club databases to lure land-based casino customers to online offerings. Wieczynski.
Still some benefits for Wynn Ineteractive
Bernstein analysts believe Wynn Interactive's IPO could be a plus for the parent company in terms of marketing and production development costs.
Wynn's strong brand recognition combined with a reputation for luxury and a wealth of land-based casinos - something many rivals in the iGaming and online sports betting segments lack - could be another advantage for the interactive entity, which is expected to go public soon.
Wynn's decision to pursue a blank check deal comes as there are still many positive expectations for the growth of online gaming in North America, but also because related stocks are now in a bull market.