In the last month, there have been two big sports betting deals that have failed. DraftKings has dropped its $ 22 billion bid for Entain. Meanwhile, Wynn Resorts canceled the merger of WynnBet with Austerlitz Acquisition. And in the blink of an eye, the searing sports betting market started to cool down.

BetMGM is a 50-50 joint venture between MGM and Entain. Apparently, this complicated the acquisition of Entain by DraftKings. (Image: Amy Calistri / Online Game)

Once the United States Supreme Court lifted the ban on sports betting, it started a sort of gold rush. Businesses exposed to sports betting had a choice between transactions as everyone tried to claim the rapidly growing industry. But the recent failure of two mega-deals suggests the love affair with sports betting may be on hold.

DraftKings: sports betting offers get complicated

In September, DraftKings made an offer of more than $ 20 billion for UK sports betting and gambling company Entain. The deadline to negotiate a deal has been extended to November 16. But merger talks collapsed long before the deadline.

DraftKings officially withdrew its Entain offer on October 26. DraftKings was not the first American company to fail in an Entain merger. Earlier this year, Entain rejected an $ 11 billion offer from MGM Resorts. MGM believed the deal made sense since Entain and MGM each own 50 percent of BetMGM. Entain, however, believed MGM’s offer was too low.

DraftKings’ bid may have been high enough, but other issues complicated the deal. For example, MGM has hinted that it will block the DraftKings deal unless Entain completely abandons BetMGM.

“We will have to find a solution,” said MGM CEO Bill Hornbuckle. “We have 50% now. I would like more. I would need more.

The other problem with the DraftKings offering was the composition of the offering. DraftKings planned to pay Entain with a combination of cash and stocks. DraftKings shares, however, are falling out of favor with investors. It is currently trading at half the price of its all-time high this year. Thus, its stock is no longer the business improvement factor it once was.

WynnBet: SPAC mode is over

Another of the sports betting deals that failed this year was between WynnBet and Austerlitz Entertainment. Like the Draftkings Agreement, it may also have fallen victim to market trends. In May, Wynn Resorts announced that Wynn Interactive would go public through a merger with Austerlitz Acquisition. Austerlitz is a Special Purpose Acquisition Company – or SPAC.

SPACs have become very popular as a way for companies to go public without the time and expense of an initial public offering. In fact, DraftKings went public after it was acquired by a SAVS.

Following in DraftKings’ footsteps, WynnBet agreed to sell 42% of Wynn Interactive to a SPAC formed by Bill Foley, owner of the Vegas Golden Knights. Six months later, however, the two companies mutually agreed to end the deal.

WynnBet's latest termination suggests a slowdown in sports betting offers.
Does Wynn Resorts have an interest in keeping WynnBet if a business takeover is in progress? (Image: John Locher / AP)

Two things may have contributed to the failure of this agreement. First, the SAVS fell out of favor. SAVS investors have the option of redeeming their investment if they do not like the acquisition objective. During the first three months of the year, around 10% of investors withdrew from SPACs during the acquisition phase. In September, PSPC’s redemption rate exceeded 50%. At this rate, it is almost impossible for an after-sales service to increase its expected acquisition price.

Last year Bill Foley was billed as the King of SAVS. But even Foley’s plans stumbled this year. Paysafe, one of Foley’s recent acquisition targets, hit $ 19 a share shortly after its trading debut. Today, the payment company’s shares are trading for less than $ 4 per share.

May Trump Casino Deals Sports Betting Deals

Perhaps the bursting of the SPAC bubble was enough to derail the WynnBet deal. But another factor may have helped. As sports betting offers slow down, casino offers still seem to keep pace. Notably, Vegas properties continue to change hands with good valuations.

Recently, Blackstone sold the Cosmopolitan for $ 5.65 billion, after buying the Strip property in 2014 for $ 1.73 billion. The strength of the casino market may have influenced Wynn’s strategy.

Wynn founder Steve Wynn left the company in 2018. Current Wynn CEO Matt Maddox will step down in January. The announcement of Maddox’s impending departure came the same week that Wynn terminated his agreement with WynnBet. Some believe these moves signal a possible sale of Wynn Resorts.