Wynn Interactive Collapsing SPAC Deal an Ominous Sign for U.S. Sports Betting Industry?

Dave Bonderoff

Last Updated: November 17, 2021 7:44 AM EST • 2 min 26 sec read. Twitter link Google News Link

In this photo taken on March 5, 2019, signage for the Wynn casino resort is seen in Macau. - The trade war may have sent ripples of uncertainty through the world's second-largest economy but one corner of China has so far remained steadfastly buoyant -- the gambling enclave of Macau. (Photo by Anthony WALLACE / AFP) / TO GO WITH Macau-gaming-economy-tourism, FOCUS by Yan Zhao with Jerome Taylor

What are the potential ramifications in the US sports betting industry from Wynn Interactive's collapsed deal with Austerlitz Acquisition Corp?

There has what can best be described as a legal sports betting gold rush happening in the US since the Supreme Court overturned the blanket ban on sports wagering in 2018. Very little has slowed the momentum of the industry's growth. There were very few signs that expansion wouldn't continue exponentially for years to come ... until now.

The collapse of a deal between Wynn Resorts and special purpose acquisition company (SPAC) Austerlitz Acquisition Corp., to take Wynn public, may have exposed some cracks in the expansion of the overall platform. Sports betting companies are in the midst of a valuation slump. Costs for sportsbooks to acquire and maintain customers is going up, and the appeal of investing in sportsbooks may not quite be at the level it was even a few months ago.

"Mutually Agreed" Decision

The end of the Wynn Resorts/Austerlitz Acquisition Corp., merger is said to have been mutually agreed upon. It means that the SPAC is no longer involved with Wynn. The sports betting operator is ending plans to go public.

There are signs that the breakup may be more due to the economics surrounding the growing legal sports betting industry. The SPAC’s role in ending the plan to take Wynn public may have been more involved than first thought. After all, Penn National's stock has fallen 57 percent since it went public and DraftKings Sportsbook's stock has slumped about 42 percent since its peak earlier this year.

Austerlitz Acquisition Corp., no doubt saw those numbers and may have pumped the brakes on the acquisition deal.

Wynn's Side

Wynn Resorts has signaled that it is perhaps slowing the process of its expansion plans out of necessity as well. The company will reportedly burn about $100 million in cash in the last two quarters of this year. This is thanks to exploding but necessary advertising and customer acquisition costs.

“The market is really not sustainable right now. Competitors are spending too much to get customers. The economics are just not something that we’re going to participate in in the short term,” said soon-to-be-former CEO Matt Maddox on Wynn’s third-quarter earnings conference call earlier this week.

Advertising, welcome bonuses, and the simple cost of doing business in the competitive legal sports betting market have grown immensely. Wynn has signaled its intention to cut spending. It may possibly also slow marketing to new bettors that have made a habit of shopping around at the rash of available sportsbooks in their jurisdictions.

Uphill Battle

Wynn Resorts joined the US legal mobile sports betting fray with the intent of becoming a heavy-hitter off the bat. It has found that the sportsbooks like DraftKings and FanDuel of the world have an immediate customer database built into their brands, thanks to their years as a DFS provider. Hence, those providers’ customer acquisition is far simpler and less expensive.

Fox Bet has FOX Sports, and PointsBet has NBC. CBS and Caesars are aligned, and Bally's has the previous Sinclair Broadcasting to help with its valuable customer acquisition goals.

While taking a small step back, Wynn is by no means ending its pursuit of a top-tier sportsbook brand.

“With our continued rollout of product features and planned new state launches, including New York, we remain excited about WynnBET’s future," said Interactive CEO Craig Billings Froda. "As we discussed on the Wynn Resorts third-quarter earnings conference call earlier this week, in light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy. In so doing, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022. WynnBET’s best days lie ahead of us.”

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Written By:
Dave Bonderoff

Dave Bonderoff and betting go hand-in-hand. Both are characterized by "odds". Dave fancies himself as one of the most dedicated sports and pop-culture junkies around, to the chagrin of his family and friends. Following sports for 50 years and writing about it for 20, Dave hasn't found a sport yet that can't contribute to 2-3 straight hours of couch time. That search remains ongoing. As a good old Canadian boy, hockey is in Dave’s heart, as is curling sadly. But evolution is a real thing and that’s why football, baseball, and just about every sport on the planet has become a passion. Dave isn’t afraid to kill some time obsessing over politics or the far-too-frequent awards shows the consume the airwaves.