“ When you think about SPACs on their own, there is a huge amount of liquidity in the public markets because of the current low interest rate regime and people are looking at high growth assets generally”
10
Market Monitor SPACs to the fore
“ When you think about SPACs on their own, there is a huge amount of liquidity in the public markets because of the current low interest rate regime and people are looking at high growth assets generally”
MATT DAVEY, TEKKORP says.“ You see that in DraftKings, in particular. There is a belief they will block out a chunk of the market. So, the variance between the price now and the price in a few years is very big.”
PRICING IN THE US STORY
The prospects of investor interest
in the US clearly piques interest in the European gaming sector which, as is discussed later, is relatively starved of investor interest at present. Certainly, when it comes to multiples, there is evidence in the listed sector of a wide disparity in the multiples being achieved by US gaming and betting companies and those on the European side.
It helps explain, for instance, the plans being laid by Flutter to look at floating its FanDuel business in the US to cash in on the Stateside enthusiasm and achieve a higher valuation for the business than could be achieved now in the UK.
This essentially opportunistic play is being replicated down the corporate ladder and is perhaps typified by the Genius Sports float, where a loss-making European- based business has managed to parlay its interest in US sports data rights into a more than $ 1.5bn float via a SPAC.
“ There is an element that everyone has to dance at the moment,” says Loudon.“ Every time there is a SPAC, it spawns more activity. These businesses now have to do deals.” There is, he says,“ huge enthusiasm” for gamingrelated M & A and“ full prices are being paid for good assets.”
“ That said, I think it is sustainable M & A – companies are a lot more active; they are moving faster, and everyone is competing so it is easier to get prices away at higher prices. Everybody’ s leaning in.”
The backdrop in the US, meanwhile, provides further encouragement.“ I don’ t see an end in the near future – you still have so many states that are going to open up,” says Loudon.“ I can’ t see within the next few years anything meaningfully challenging the enthusiasm for gaming and the momentum behind the whole opening-up process.”
Still, David McLeish, corporate lawyer at Wiggin, warns that for
European businesses looking over the pond for a higher valuation for their business,“ there has to be a US story”.
SPACS OUTSIDE THE US?
Where there is no US story, however, the options for SPACs outside the US are fairly limited. While they are currently also possible in Amsterdam and in Singapore, although blank cheque companies are possible in the UK, there are issues around the need to suspend shares ahead of any transaction.
This makes them relatively unattractive, according to the capital markets legal team at Bird & Bird:“ The main deterrent to SPACs listing on the London markets( and this applies to AIM as well as the main market) is the requirement for the shares in the SPAC to be suspended as soon as a deal is announced to the market. This could leave investors locked into the stock for a long period of time without the ability to trade while the SPAC is preparing a new listing document to relist the enlarged group.” iGB Market Monitor