Wiln Resorts eyes sale of sports betting business at steep discount
The Post learned that Wynn Resorts is looking to unload its online sports betting business at a steep discount because of stiff taxes and costly promotions needed to lure customers.
The Las Vegas-based casino giant is quietly shopping its Wynn Interactive unit -- operator of the WynnBet online gaming app -- and has slashed its asking price to $500 million after trading a $3 billion valuation less than a year ago, a source close to the situation told The Post.
The fire sale comes less than six months after Wynn signed up for the brand ambassador, Shaquille O Neal, for a splashy spring launch for WynnBet. O Neal even sold his minority stake in the Sacramento Kings NBA team so he could work closely with Wynn without breaking the league's gambling rules.
O Neal said in an August press release that he is so excited to take WynnBet to new heights. I believe that WynnBet will be a strong force in the industry because of the fact that mobile sports betting is having a major moment. A few months later in November, Wynn said it was reversing 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.
The deal would have armed WynnBet with $640 million in cash for marketing, as well as creating a public company with a $3.2 billion valuation. After revealing that the app was on track to burn $100 million in both the third and fourth quarters, outgoing CEO Matt Maddox signaled that he wasn't interested in throwing good money after bad.
The market is not sustainable right now, Maddox said on a Nov. 10 earnings call. We're not going to participate in the economics. Morgan Stanley analysts said they valued WynnBet at $700 million, but they only expected the app to win a 2.5% share of the North American market.
FanDuel and DraftKings, which together control a majority of the online sports betting market, have recently dangled credits as high as $1,000 to sign up new members. Caesars has acted aggressive promotions in New York despite the state tax rate of 51% on online gaming revenues.
The New York Gaming Commission said mobile sports betting was off to a brisk start in its first week, with more than 600 million bets taken by Caesar s, FanDuel, DraftKings and BetRivers. Gaming analysts said that the massive haul was due to heavy promotion from the operators. Barry Jonas, an analyst at Truist said, "I personally am surprised at the level of promos we are seeing considering the 51% tax rates. I think it has to tone down long-term if there is any hope of profitability in the state. It is a long way from last spring, when online sports betting companies were trading as high as 25 times projected revenues as tech investors, including Cathie Woods'Ark Invest, hyped their stocks, arguing that the epidemic was poised to cause an explosion in mobile gaming.
Even the highest-valued among them are trading closer to six times. DraftKings, the largest listed sports-betting company, went from trading in the mid-50 s in May to the low $40 s in November. Its shares closed on Friday at $19.46.
A tipping point, said Jonas, was when DraftKings made an unsuccessful $20 billion offer for British bookmaker Entain in September, indicating that it wanted to gain exposure outside the US market.
A Wynn spokesman said the company wouldn't comment on what he called market speculation and rumor. He said he was clear on his last earnings call about the current highly competitive nature of the online sports betting market and our desire to operate that business in a way that will create long-term shareholder value.
The banking sources said that the most logical suitors for Wynn Interactive are Fanatics and Penn Interactive, which is owned by WynnBet, along with Wynn Slots and BetBull. Sources said neither has shown clear interest.
David Katz, a gaming analyst at Jefferies, notes that most players claim the taxes and promotions, however punishing, haven't surprised them.
The operators are telling us they have the mathematical models that give them the intelligence that they are spending money wisely - and the Street doesn't believe them, Katz said. The way in which the Street sees the future has changed in the last three to six months - there was certainly a lot of enthusiasm but the winds changed quickly. The question is whether the steep promotions will pay off soon. Katz estimates that it costs $300 to $500 on average to acquire an online gaming customer.
Katz said that he doesn't think anyone knows how sticky customers are. Time will show who is right.