Worried you’ve missed the betting stocks bandwagon? Meet BlueBet, the next aspirant
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For a nation that gambles as much as Australia there are surprisingly few gambling stocks.
Australia has the highest per capita expenditure – 40 per cent ahead of the runner-up (Singapore) and double the average of Western Europe.
Yet as Michael Sullivan, the boss of BlueBet (ASX:BBT) told Stockhead, there is no shortage of non ASX-listed companies.
“All the big companies you know of – Ladbrokes, Sportsbet – they’re all owned by London companies,” he said.
“So I think there’s an appetite for the sector and we’re getting good support.”
Sullivan is speaking of support for his company’s IPO which has launched this week – seeking to raise $80 million at $1.14 per share.
The deal, spearheaded by Ord Minnett and Morgans, is expected to culminate in an ASX listing on Friday July 2.
Arguably another reason for investor appetite is the success of PointsBet (ASX:PBH) and Betmakers (ASX:BET) which have grown from $2 to $12.54 and 4 cents to $1.08 respectively in little over two years.
The reason behind the success of the pair is their expansion into the USA – something which BlueBet wants to pursue as well.
“The main reason we’re listing, a lot of it has to do with America, but I think the time is right,” Sullivan said.
“I‘ve only been running BlueBet for five-and-a-half years but have 30 years in the industry and the time is right now because the sector is liked by the market and I think we’ve got great aspirations to grow in Australia, but in America also.
“I wanted to go as a public company, particularly with strategies we’ve got going in relation to that, and raise capital”.
But before hearing more from Sullivan, it’s worth recalling that efforts for Australian betting companies to enter the US have only been possible for three years.
While the decision was made on the legal basis that these violated constitutional principles limited Washington’s control on state policy, certain states such as New Jersey had long advocated for a change to encourage tourism and tax revenue.
Three years on, 19 states plus the District of Columbia have legalised it. If all 50 states fully legalised sports betting it would be worth at least US$22 billion ($28.2 billion) in revenue.
Sullivan concedes it is unlikely all 50 states will legalise betting. He told Stockhead he is eyeing five priority states – Virginia, Iowa, Colorado, Tennessee and Maryland – and thinks more could follow once BlueBet proves itself.
“America is unusual in our space in they have very little experience from a technology and people point of view because it’s been illegal for so long. They don’t have same experience we have,” he said.
Sullivan says once his company proves itself in the US more doors might open, noting some potential partners have adopted a wait-and-see approach.
“We’re going to go into these five states where we can get our own licence, partner with a casino (not a JV, just take a “skins” – which is what they call partnerships) and prove our technology, prove my people and then I can go to these bigger mid-tier casinos and say ‘This is what we’ve done we’ve established this and we want to do a joint venture’.
“So that’s why we’ve targeted smaller states. The four biggest states still a haven’t come online – New York, Florida, Texas and California – they all haven’t legislated yet.
“They’re going to because they need the revenue, they can see what a state like New Jersey is producing out of it.”
Sullivan thinks his firm will stand out because of its technology.
“In our view what’s going to happen is it’s going to be product and with our mobile-first strategy and what we do with our product, we believe it’s going to give us an advantage to be in America,” he said.
“I own all my own technology, I’ve been developing it for 20 years because the IT director that used to be with me, he’s come over and is my IT director (Gary Harris). So we own it all.
“We’ve been developing this product over a long period of time, it’s clearly worked in Australia, we’ve got a good profitable business and we think there’s a chance to go to the US.”
BlueBet was founded to be a “mobile-first” betting company and Sullivan says COVID-19 accelerated the shift from retail betting to digital betting.
The company’s turnover and net revenue in the first half of FY21 grew 91 per cent and 144 per cent on the prior corresponding period and it currently boasts 92,000 registered users which placed over 6 million bets in the 12 months to March 31 2021.
“Once they try our app they don’t go back,” he declared.