Wynn Resorts is supposedly looking to sell Wynn Interactive at a discounted price of $500 million. The New York Post reported the rumor first. This comes after nine months since Wynn and Austerlitz Acquisition Corp, a special purpose acquisition company, formed a contract.
The two companies agreed to take the sports betting and iGaming business to the public at a valuation of over $3 billion. However, in November, Wynn scrapped the merger on account of promotional spending in the betting market.
Wynn Interactive CEO Craig Billings said the company was focusing on a more Return to Invest focused strategy due to increased marketing and promotional spending. Craig also noted that the company was expecting capital intensity of the business to decrease significantly by the end of the first quarter of this year.
A few days after Craig’s remarks, Morgan Stanley valued Wynn Interactive at 700 million. Meanwhile, Wynn Resorts confirmed it did not want to be associated with unfavorable economics to get a market share in an already competitive sports betting market.
Expensive Betting Promos
Reports show that online sportsbooks spend between $300 and $500 to get a new client. The leading sports betting companies in the country, such as FanDuel and DraftKings, spend over $1,000 to acquire a new client.
Recently, New York launched sports betting. One of the companies that launched their services is Caesars, giving over $1000 credits to new sign-ups. Although New York charges a 51 percent tax on earnings, sportsbooks reward new players with incredibly high rewards.
According to soon-to-retire CEO Matt Maddox of Wynn, the sports betting market is not suitable at the moment. Matt feels competitors are using a lot of money to acquire customers. Matt also said his company was unwilling to participate in such an economy.
Besides Caesars Sportsbook, FanDuel, DraftKings, and BetRivers have launched in New York. The four generated over $603.1 million in revenue barely two weeks after launching. After subtracting the 51 percent tax, the four companies were left with gross gaming revenue of only $48.2 million collectively.
Yet, operators continue to offer some of the most expensive promos ever seen. Some analysts feel this might not work in a state where tax is more than the usual average. Profitability, which is already subtle for some operators in other states, is almost impossible in New York.
Wynn Interactive is expected to launch in New York soon after the New York Gaming Commission approves it. But, it is still unclear whether the expensive promos or potential sale will hinder Wynn from launching in New York.
Possible Buyers of Wynn Interactive
Wynn is yet to confirm the rumors. But, the post mentions Penn National Gaming and Fanatics as possible buyers. Fanatics has been discussed severally as being in the process of acquiring Wynn Interactive. But, it is not clear how deep the brand is into buying Wynn Interactive.
On the other hand, Penn is a credible suitor. Similarly, there is no information on how it would acquire Wynn Interactive or how it would integrate it with Barstool Sportsbook.
Surprisingly, Fanatics and Penn do not have a license in New York. So, buying Wynn Interactive might seem like a hindering aspect.
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