Is WynnBet Throwing In The Towel On US Sports Betting?

According to an anonymous source in the New York Post, Wynn Resorts is shopping its WynnBet online gambling division.

The Post reporting includes the following bit of information:

“The Las Vegas-based casino giant is quietly shopping its Wynn Interactive unit — operator of the WynnBet online gaming app — and has slashed the asking price to $500 million after floating a $3 billion valuation less than a year ago.”

And as the Post reports, outgoing CEO Matt Maddox hinted at the company making tough decisions during a November 10 earnings call. “The market is really not sustainable right now,” said Maddox. “Competitors are spending too much to get customers. And the economics are just not something that we’re going to participate in.”

If the rumors are true, WynnBet is offering its wares at the bargain-basement price, but that begs the question, even at that price, is anyone interested?

I Can Make it Work?

If Wynn doesn’t believe it can make it work, is there a company that can? Wynn’s interactive division adds nothing of value to the current crop of legal US sports betting operators it was competing with, and there are very few entities sitting on the sidelines at this point.

The Post article references Fanatics, one of the only possible suitors that makes sense. But Fanatics has been linked to multiple sports betting operators as it looks to acquire the tech that will position it to compete with FanDuel, DraftKings, BetMGM.

To that end, can the BetBull backend WynnBet is built on achieve Fanatics’ goal?

Welcome to Double Jeopardy, Where the Prices Double

Very few US gambling firms were prepared for the sports betting era. M&A was the answer for many companies early on, as developing in-house tech and software was too time-consuming and far riskier than acquiring a tried-and-true product.

The problem is, there are no more deals (steals) to be had. As the industry has seen with recently plummeting stock prices, everything of late has been happening at inflated values, and investors are beginning to cast a skeptical eye at the promises of future profitability. That said, the asking price across the entire sector is still sky-high.

To this point, Penn National purchased 36% of Barstool Sports in 2020 for $163 million. Penn has the option of paying an additional $62 million to increase its ownership to 50% in January 2023, along with the ability to buy controlling ownership.

Compare that to DraftKings’ acquisition of VSiN for roughly $100 million in March 2021. Or the four-year, $120 million deal FanDuel signed with the Pat McAfee show in December 2021, in what is little more than an exclusive advertising deal. Or ESPN’s $3 billion ask to lend its name to a sports betting endeavor.

Bottom line, Barstool was an absolute steal for Penn National.

A similar trend has occurred on the tech side, as it appears every time a deal is brokered, every business in the sector saw its valuation rise. Billion-dollar deals created multi-billion deals, and now the numbers bandied about are in the tens of billions.

One wonders what the price tag of the Penn National Barstool deal or the 2019 DraftKings-SBTech merger would be in 2021?

Upshot

Betting USA predicted US operators would grow tired in 2022.

“The US is proving to be a costly market to operate in. Sure, there is room enough for many operators, but the sheer number of companies trying to be major players means many will fail, and failure here means absolute failure.”

It appears Wynn might be the first operator to heed the sunk-cost fallacy and cut its losses, and avoid absolute failure.