Online gaming company Rush Street Interactive and online casino sports wagering company dMY Technology Group Inc (NYSE:DMYT) announced a merger agreement Monday with the intention of taking Rush Street public.
What Happened: DMY Technology, a publicly traded special purpose acquisition company, will combine with Rush Street to create a new entity worth around $1.78 billion, the companies said in a press release.
The value is derived from a multiple of 5.6 times on the new company's estimated 2021 revenue of $320 million.
The deal also calls for an additional $160 million PIPE investment led by Fidelity Management and Research Company.
Once the deal is completed, the new company will be named Rush Street Interactive, Inc. and trade on the New York Stock Exchange under the ticker "RSI."
Rush Street was founded in 2012 by industry veterans Neil Bluhm, Greg Carlin, and Richard Schwartz. The company operates in two states — Illinois and Pennsylvania — that legalized online gaming.
Rush also has a smaller presence in states where a scarcity of online gaming licenses exist, including New Jersey, Indiana and Colorado.
Why It's Important: Rush Street's announcement comes at an opportune time, as the company experienced a "huge weekend" of wagering amid the return of professional baseball, Rush Street CEO and co-founder Greg Carlin said on CNBC's "Squawk Box."
The company is just getting started, and its growth plan and expansion to new markets gives it an opportunity to narrow the valuation gap between its $2-billion valuation and rival Draftkings Inc (NASDAQ:DKNG), which is worth more than $13 billion, he said.
Sports wagering represents a smaller part of Rush Street's business, as online casinos bring in more revenue and target a broader demographic group, the CEO said.
What's Next: Rush Street expects to grow its business by 50% over the next year and it has more financial flexibility to achieve its goals after finalizing the SPAC deal, Carlin said.