US investors appear to have some pent-up demand for online gambling companies. Over the last couple of weeks, both DraftKings and GAN enjoyed quite successful public listings.


The DraftKings market cap soared past $7 billion since the company listed, way beyond the $3.3 billion the firm originally projected. Shares traded near $24 last week.


Meanwhile, FanDuel‘s platform provider GAN also moved from its London listing to the Nasdaq this week and enjoyed a similar pop. The firm is now trading at nearly $14 a share, easily surpassing its projected IPO range of $6.50-$8.50.



More than DraftKings, GAN saw coming

In other words, US investor appetite for online betting opportunities is significantly outstripping the expectations of even the companies involved.


It’s not entirely out of the blue. There was a vibrant market for private investment in the sector before the coronavirus pandemic. And the first companies to list in a sector undoubtedly benefit from scarcity.


However, the lofty valuations will have competitors of DraftKings and GAN looking on with interest. Could any of them look to make a similar leap into the US markets and enjoy a similar boost?


“Many will want to, few can,” GAN CEO Dermot Smurfit said. “It’s really hard to get through the (Securities and Exchange Commission.)”



Could Kambi relist in the US?


When talking with a range of investors and analysts, two names cropped up repeatedly: Kambi and William Hill.


Both have strong footholds in the US and businesses that now look undervalued by their respective markets in Stockholm and London.


“It would make perfect sense for me to see Kambi list [in the US],” says Andreas Aaen, the CEO of Nordics firm Symmetry Invest. “More and more of their revenue comes from the US. I think Kambi would trade at 500 SEK or so in the US if you look at GAN and DK valuations.”


That 500 SEK estimate would equate to a trebling of Kambi’s share price. If nothing else, it reflects just how much of a premium the US market appears to be offering, at least in the eyes of international investors.


However there are plenty of obstacles for Kambi. Unlike DraftKings and GAN, Kambi gets a minority (37%) of its revenues from the US. Europe remains the core driver of the business and it’s understood by LSR that a US IPO isn’t an immediate priority.



What about William Hill?

On the operator side, Hills could have the most to gain from spinning out and listing its US arm.


The London-listed firm currently trades on a P/E around 9, compared to 32 for Flutter for example. That’s because the US business is bundled together with a UK retail footprint and various European operations.


The sports betting giant also has more than $1 billion in debt and hefty repayment obligations that are only getting more onerous without sports.



Splitting off in the US?

Canaccord Genuity suggested in a recent note that one way to raise funds in the short term could be to divest part of its equity stake in William Hill US.


The analyst said: “Given the look-through valuations for US-focused peers such as DraftKings and FanDuel, this may be a viable option with the least dilution for PLC shareholders,”


A sale to a private equity company could be in play, or Hills could follow the DraftKings route more closely and list the US business in New York.


The listing could even facilitate a private sale by helping to clarify the value of the business.


“That would then make WH US a cleaner target as I can’t see it being independent for long,” says one London-based equities analyst, who asked not to be named. “Eldorado already owns 20% of it.”


Management teams around the industry are already looking at ways to future-proof their business in a post-COVID-19 world. Don’t be surprised if DraftKings and GAN have company on the US stock market sooner rather than later.


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