Roundhill Investment founders Tim Maloney and Will Hershey recently sized up the sports betting market.
BETZ ETF: The Roundhill Sports Betting & iGaming ETF (NYSE:BETZ) currently holds 37 different stocks. PointsBet, William Hill, DraftKings Inc. (NASDAQ:DKNG) and Penn National Gaming (NASDAQ:PENN) are the largest holdings in the ETF.
“Our rules do allow for that if a pure-play sports betting company becomes public,” Maloney said in an email when asked if they would add new stocks. The next rebalancing will take place in mid-October.
“It may not be for everyone, but if you’re excited about the prospects for legal sports betting in the US and around the world, then I think BETZ is at the very least worth a look, but do your own research,” Maloney said.
The ETF is up 23% in its first 13 weeks of trading. The duo behind this ETF also are the founders of the Roundhill BITKRAFT eSports & Digital Entertainment ETF (NYSE:NERD), which has $44 million in AUM and is up 54% year to date.
Hitting $100 Million: The ETF recently passed $100 million in assets under management.
“A thematic ETF hitting $100 million in a matter of months is, let’s just say, uncommon,” Maloney said. He noted the fund saw “material inflows in the week following launch,” which he noted was when all four of the big professional sports leagues had no games.
The Loss of Professional Sports: Maloney was surprised to see sports betting stocks perform so well when the major sports were in a quiet period.
“If I am being honest, yes, a little bit. I think it’s indicative of the investing public skating to where the puck is going to be,” Maloney said using a hockey analogy. “We actually saw activity in non-traditional markets like table tennis and esports."
Benzinga asked the Roundhill founders if they thought the loss of college football teams sitting out this season could be a negative for the sports betting market.
“Based on the behaviors we’ve seen thus far during Covid-19, I would venture that some of the lost handle would be recycled into other events,” Maloney said.
Market Size: As analysts continue to issue ratings on the big players like Penn National Gaming and DraftKings, estimates for the sports betting and iGaming market are all over the place. Rosenblatt sees sports betting hitting $18 billion and iGaming hitting $21 billion. Bank of America estimates sports betting and iGaming at a combined $24 billion. Morgan Stanley sees the combined market worth $12 billion.
“I could see sports betting reaching $10 billion or larger in the US by 2025,” Maloney said. “iGaming is a bit harder to predict the size of the US, but on a global basis could eventually hit around $100 billion."
Talking SPACs: One of the big trends this year for the markets is the emergence of SPACs as a way for private companies to go public.
“There seems to still be some hesitation from more traditional pools of capital about the industry which may lead to the SPAC route being preferred versus the traditional IPO,” Maloney said when asked if we will see sports betting companies going public this route.
“We’ve also already seen some activity with Golden Nugget, Rush Interactive, Skillz, and a few more rumored but not yet confirmed,” Maloney said.
Golden Nugget is set to go public via Landcadia Holdings II Inc. (NASDAQ:LCA). Rush Interactive is going public with dMY Technology Group Inc (NYSE:DMYT). Skillz is going public with Flying Eagle Acquisition Corp (NYSE:FEAC).
Barstool and Dave Portnoy: One of the big stories for the sports betting market has been Penn National Gaming’s push into online sports betting through its upcoming Barstool App. The company acquired a 36% stake in Barstool Sports.
“Take a large, engaged audience of sports fans and give them the ability to bet directly on your platform!” Maloney said. “I do believe that the brand value that Barstool brings from the media side is a competitive advantage that existing players like DraftKings and FanDuel do not have."
Hershey recently discussed the non-typical acquisition of Barstool by Penn and how it may be one of the all-time great acquisitions given the cult following, strong fans, and how it keeps Penn moving forward.
“If 2020 has taught us anything, it’s that you don’t fight the Fed or Dave Portnoy,” Maloney adds.
Photo credit: Baishampayan Ghose, Flickr