It has barely been 18 months since Las Vegas Sands (LVS) belatedly waded into the iGaming waters. Already, it appears to have found those waters frosty and is scrambling back to terra firma. In the process, it may be casting its online gaming investment division adrift.
At least, that was the word last week from the consultancy firm Eilers & Krejcik Gaming, subsequently repeated by The Nevada Independent. That appears to be an assumption based on the revelation from Jake Pollard and Scott Longley’s Earnings & More newsletter that Davis Catlin was no longer working for LVS. It had hired Catlin in July 2021 to guide its business-to-business online gaming strategy.
A Series of About-Faces
LVS founder and former CEO Sheldon Adelson aggressively opposed online gambling. He was a staunch believer that internet gambling would lead to increases in problem gambling and underage gambling and hurt retail casino revenue. Over the last decade of his life, he spent millions in various states battling against efforts to legalize it.
However, following Adelson’s January 2021 death, his successor as chairman and CEO, Rob Goldstein, announced that the company would begin exploring the online space.
It would have been very late for LVS to try to build its own technology or a consumer-facing online brand. Instead, Goldstein picked the 14-year digital gaming veteran Catlin to help LVS become a “strategic investor” in the business-to-business space.
At the time of the hire, Goldstein said:
Digital gaming and other related offerings are still very much in the early stages of development, and we believe there is an outstanding opportunity for us to invest in the technologies being developed.
Yet it seems that Catlin’s run lasted just 15 months. That’s despite an assurance from Goldstein during the Company’s Q2 conference call in July that it would continue to make investments.
Those investments have included sports betting monitoring service US Integrity and Huddle Tech. Those combined companies, reportedly worth $40 million, planned to provide wagering services for US sportsbooks. For now, it seems such existing activities will continue while LVS reins in its future ambitions.
Writing for the Eilers & Krejcik newsletter, Chris Krafcik said:
Existing investments are thought to be broadly unimpacted, though there is speculation Sands could try to sell the investments to a third party.
Per Krafcik, multiple companies with whom LVS had signed term sheets have seen those term sheets pulled back.
Terra Firma’s Not So Firma, Either
LVS’s long-term ambitions may not be in the US at all. In February, it completed the sale of its Las Vegas resorts, Venetian Las Vegas and the Palazzo. The buyer, New York-based real estate investment trust Vici Properties, paid $6.25 billion for them.
Sands can now concentrate on its land-based casino operations in Singapore and Macau. That may be a sound strategic decision if the Asian gambling market returns to pre-pandemic revenue levels. However, China’s zero-COVID policies have hamstrung Macau’s recovery, though things are improving in Singapore.
In the first nine months of 2021, LVS reported net revenue of $2.25 billion for Macau and a profit (EBITDA) of $264 million. This year revenue cratered to $1.18 billion, and the company posted a loss of $273 million in Macau over the same period. That weakness essentially cancels out the recovery in Singapore, where LVS increased its revenue from $1 billion to $1.83 billion and its profits from $271 million to $783 million, again comparing the first three quarters of 2021 to 2022.
Wynn Interactive’s Rocky Road
There are parallels between LVS’s entry – and possible exit – from iGaming, and the trajectory of Wynn Resorts. It, too, made a late attempt to enter the online gambling space after a change in leadership.
For the past year and a half, Wynn Resorts has been playing catch-up with its business-to-consumer online brand, WynnBet. Over that time, it has made multiple attempts to spin off Wynn Interactive.
In May 2021, it announced plans to merge Wynn Interactive Ltd. with Austerlitz Acquisition Corporation, a special purpose acquisition company (SPAC) launched by Las Vegas Knights owner Bill Foley. The deal would have valued Wynn’s online arm at more than $3 billion, taken it public, and injected over $600 million into the business. Wynn President Craig Billings would have served as the entity’s CEO.
However, six months after the announcement, with WynnBET poised to post a nine-figure loss in the second half of 2021, Wynn Resorts and Austerlitz called off the merger. CEO Matt Maddox stepped down after the busted deal, and Billings took over. Maddox said at the time:
The market is really not sustainable right now. Competitors are spending too much to get customers. And the economics are just not something that we’re going to participate in.
Billings attempted to put a positive spin on things, concluding that “WynnBET’s best days lie ahead of us.”
That has technically been true, as WynnBet has posted a smaller loss in the first six months of 2022 than it did in 2021.
Along the way, however, developments around WynnBet have stifled such optimism. After the collapse of the SPAC deal, Morgan Stanley valued WynnBet at $700 million, a far cry from the $3 billion implied in the SPAC deal. It also forecasted a North American market share of just 2.5% for the brand.
Around the same time, in January 2022, The New York Post reported that Wynn had shopped Wynn Interactive around at an even deeper discount, reportedly as little as $500 million.
Industry-Wide Headwinds
Although LVS and Wynn Resorts both hurt themselves by being late to the party, they’re not the only companies struggling. Profitability is proving harder to come by in the US online gambling space than many anticipated.
For evidence of that, we have to look no further than the latest quarterly results from DraftKings.
The Company’s Q3 results and guidance revealed the following:
- A shortfall in unique paying customers – 1.6 million, vs. earlier estimates of 2 million
- Slowing customer growth – 22%, down from 30% in Q2
- A larger-than-anticipated full-year loss
- The need to rein in advertising spending
The result was DraftKings stock’s worst-ever day since 2019, with shares falling 27.8%.
Those grim results, combined with Las Vegas Sands’ announcement and Wynn’s ongoing struggles, suggest that industry sentiment is starting to turn pessimistic.
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