SiGMA Americas Summit: Investing in the Nascent Ontario Sports Betting Industry

SiGMA Americas Summit: Investing in the Nascent Ontario Sports Betting Industry
By Mark Keast

When it comes to investing in the Ontario sports betting industry, what are investors looking for? What makes the industry unique, outside of a typical technology investment?

“To be a successful investor in the gaming space, you have to be willing to accept and understand the regulatory environment, tax environment, a lot of specific things relating to the gaming space,” said Robert Young, managing director, equity research-technology at Canaccord Genuity, a technology analyst for the firm.

A panel discussion that included Young, Edward King, co-founding partner and co-CIO at Acies Investments, and Sooraj Rao, CEO at Mountbet, was part of SiGMA’s inaugural Americas Summit, held this week at Enercare Centre in Toronto.

“The gaming industry is higher risk, but generally have a path to higher cash flow, and investors are always looking for that,” Young said. “The casino or online gaming business has always been one where people see that path.”

The iGaming market launched in Ontario on April 4.

 
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‘Barely Scratched the Surface’

The panel was asked how public market valuations are trending in gaming, with the recent overall downturn in valuations in the technology sector.

“Right now we are in the nadir of whether valuations are unjustifiable in our minds compared to the long-term opportunity this industry presents,” King said. “We have barely scratched the surface of consumer penetration, consumer demand and consumer expenditure, in terms of what the long-term possibility of this industry will be.” 

Looking at rising interest rates, inflation and general economic malaise, there are stiff winds across the markets now.

“But if you fully believe in this industry and you have a liquidity horizon that can withstand shock you have arguably the greatest investment opportunities right now to buy into a sector at its nascency,” King said.

 
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Goal Should Be Long-Term Success

On the private market side, entrepreneurs and operators are adjusting their “stratospheric” valuations in line with where public markets are. Gaming companies need to set themselves for long-term success, King added, raising not just this round of capital, but raising the next round and the one following that.

The panel saw the current economic malaise lasting at least a year. 

“In terms of looking at investments, I am looking for positive EBITBA, positive cash flow,” Young said. “We always underestimate the eventual size [of a company], we always overestimate how fast it will materialize.”

Said King: “It’s very important to disassociate the hype. Let’s get down to the basics, and let’s see this industry develop.”

 
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Celtics Favored Over Warriors

According to FanDuel Sportsbook Ontario, the Celtics are a four-point favourite in Game 4 of the Finals versus the Golden State Warriors tonight. Bettors seem a little wary of Steph Curry’s ankle injury sustained in Game 3, with his points total market seeing 55% of the stakes to the under.

Over at DraftKings Sportsbook Ontario, the most bet player prop is Curry Over 4.5 three pointers made (-130). The second most bet is Jayson Tatum Over 26.5 points (-120).

 

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Contributors

Mark Keast

Mark Keast has recently covered the sports betting industry in Canada for The Parleh, and is a long-time sportswriter and editor, most notably with the Toronto Sun.