Online wagering company, BlueBet Holdings Limited (Proposed ASX: BBT), are the latest online wagering company to make their public debut, expected to list on the exchange on July 2. BlueBet were looking to raise $80M, asking $1.14 per share, giving the company an indicative market cap at completion of the offer of $228.1M.
BlueBet was founded by their now Executive Chairman, Michael Sullivan. The former Sportingbet CEO of 13 years, started the mobile-focused online wagering company in 2015, after his time in the role made it clear that online (particularly mobile), was the direction the wagering industry was headed. BlueBet has since grown to over 92,000 Registered Customers, 27,000 who are Active, with the company recording over 6 million bets placed through the platform in the 12 months preceding March this year.
The company reported that they are debt-free and have been self-funded by profitable operations since they started. The question that must then be asked is why publicly list? Bluebet wants to expand their market share in the domestic marketplace and who could blame them, Aussies are big punters, we have the highest per capita total gambling expenditure in the world at $1,277, 40% higher than the second largest country, Singapore.
For a country with such a big betting culture, there are only a few publicly listed sports betting stocks. Pointsbet (ASX: PBH) is one of the more recent online sports wagering companies to list, with their stock currently trading around the $14 mark, up over 570% since their IPO just 3 years ago.
The company also has their sights set on creating a name for themselves in the US, focusing on delivering their B2C model to five hand selected states; Virginia, Iowa, Colorado, Tennessee, and Maryland.
The US expansion strategy comes after a US law which restricted online sports betting was overturned, thereby allowing states to allow online sports wagering, 21 of which have taken up the offer. Once established in the US, BlueBet plans to offer already established US gambling entities with their ‘Sportsbook-as-a-Solution’, which would enable established betting companies in the US to use BlueBet’s optimized online platform under the US company’s name and branding. The idea is intended to provide BlueBet additional revenue without the extensive capital and risk.
The company has recorded huge increases in their revenue year-on-year since FY2019, recording a 75% gain in FY2020, and a forecasted 86% gain from FY2021. The company is also currently profitable, reporting a NPAT (pro forma) of over $4M in FY2020, and almost $4.7M forecasted for this year’s financial. Although the company recorded a $1.3M loss in FY2019, in the profitable year that followed, Bluebet were able to keep their total operating expenses lower than 2019 figures, despite making almost double in gross profit for the period.
There are considerable regulatory risks in the online sports betting sector in both Australia and in the US, both countries also require extensive licensing and compliance measures to operate. There is also a chance that the 16% increase in popularity from retail to online gambling to 78% seen from March 2020 onwards, could be artificially high.
Of the $80M received from the offer, the company expects to use $30M towards establishing the company in the US and initial licensing acquisition costs. $10M is being allocated to marketing here in Australia, and $4.7M for further developing their technology platform. $30M will go to existing security holders. BlueBet has reported that they will bear all costs associated with the offer totalling over $5M.
Ord Minnett Limited and Morgans Corporate Limited are acting as Joint Lead Managers and Underwriters of the deal.