In yet another setback for PlayUp, the special purpose acquisitions company IG Acquisition Corp., announced in an SEC filing on Jan 6 that it has terminated its relationship with the sports-betting platform. The split came after the New York-based “blank check company” signed a nearly $400 million deal with PlayUp in Sep 2022.
That Business Combination Agreement valued PlayUp at $350 million. More importantly, it would have enabled the Australia-based operator to begin trading on Nasdaq as a newly formed entity based in Ireland.
When the two companies announced their agreement, PlayUP CEO Daniel Simic said:
PlayUp believes this transaction will enable us to continue investing in our proprietary technology and deliver on our aspirations to be the unrivaled entertainment and betting platform of the future.
At the time, IGAC CEO Christian Goode sounded equally optimistic:
IGAC and PlayUp have the same shared vision . . . The transaction is expected to provide PlayUp with access to fresh capital to continue expanding its vision of a true single destination for the future of online betting.
However, as has often been the case for PlayUp, things did not go exactly as hoped.
Closing Conditions, Economy Trip PlayUp at the Finish Line
The deal failed in the end because of a single sentence – a standard bit of boilerplate often seen as a mere formality. As stated in the September press release:
The transaction is expected to close in the first quarter of 2023 subject to the satisfaction of customary closing conditions.
Those “customary closing conditions” are ones that continue to be an Achilles’ heel for PlayUp. On Dec 8, the parties amended the agreement. IGAC said PlayUp had failed to provide audited financial statements and other documents in a timely manner.
In that December announcement, IG also cited “market conditions that have made it difficult to obtain financing necessary to consummate the transactions.”
By January 6, IGAC had scrapped the deal altogether. Again, it cited PlayUp’s missing records as justification for backing out:
Despite SPAC’s repeated requests for [PlayUp’s] Financial Statements, the Company has failed to deliver the Company Financial Statements and has provided no indication of when the Company Financial Statements will be delivered or if they will be delivered at all.
Hoping to Go Public
SPACs like IGAC are essentially shell companies that exist only to acquire up-and-coming businesses that wish to go public. They provide a faster alternative to the traditional IPO route. SPAC deals have become a recurring feature in the online gambling world.
These companies have an expiry date attached. When a SPAC fails to find a target to acquire within the allotted time, it must return its funds to the original investors. Since pulling the plug on its deal with PlayUp, IGAC has dissolved itself entirely and redeemed shares at a price of about $10.12 apiece.
Business-wise, things had been starting to look up for PlayUp again. However, it has been in need of cash in order to compete in the US against more established companies like FanDuel and DraftKings. The company has launched its online sports betting app in New Jersey and Colorado and has a pari-mutuel racebook available in 26 states. It still hopes to launch sportsbooks in Iowa, Indiana and Ohio this year. However, the latter has proven to be a problem.
PlayUp’s plans extend into 2024, with an expected iGaming launch in Pennsylvania and sports betting in Arizona.
Following the announcement of the SPAC deal, Simic had promised that money from IGAC would help PlayUp to develop its proprietary technology.
PlayUp’s SPAC debacle reveals yet again the difficulties facing the legal sports betting industry in the US. These include inflation, high interest rates, and market turbulence. However, it also raises doubts about the company itself.
Second Failure in Finding a Buyer
This isn’t the first time a prospective buyer has walked away from PlayUp. Last time, however, it might have proved to be a blessing in disguise.
That other failed acquisition came in late 2021. At that time, PlayUp claimed to be closing in on a $450 million deal with FTX. Yes, that FTX: the now-infamous Bahamas-based cryptocurrency exchange company whose former CEO Sam Bankman-Fried is now facing charges of fraud and money laundering.
All that was still in the future when the PlayUp acquisition fell through. PlayUp blamed Dr. Laila Mintas, who was serving as its US CEO at the time, saying she had deliberately sabotaged the deal. PlayUp sued Mintas, Mintas filed a countersuit, and the drama continues to play out in court to this day.
One commonality between the FTX brouhaha and the failure of the IGAC deal is the apparent inability of PlayUp to produce sound financial paperwork. Throughout her ordeal with PlayUp, Mintas has claimed that the reason FTX bailed on PlayUp in 2021 had to do chiefly with two things: PlayUp was too “messy,” and FTX considered Simic to be “dodgy.”
After undergoing a strategic review, PlayUp announced in July 2022 that its U.S. business was back on the market. When IGAC stepped up in September, it gave PlayUp until the end of October to produce financial statements. PlayUp failed to meet that deadline and also to provide IGAC with a first draft of its Parent Registration Statement. That document likewise required audited financial information.
IGAC may not have used words like “dodgy” or “messy” to describe the situation. Nonetheless, the end result proved much the same:
The aforementioned Terminating Company Breaches have caused undue delay and are not capable of being cured in a manner that would permit the Closing to occur by the End Date and, therefore, no cure period in respect of the Terminating Company Breaches applies.
Trouble in Ohio
Bad news has been coming to PlayUp on multiple fronts.
The company recently found out that its Ohio-based sportsbook license may not go through either. Last December, the Ohio Casino Control Commission issued PlayUp a notice of intent to deny the company a mobile betting license. The OCCC based its decision on PlayUp’s Slots+ product, which it considers to have been a form of illegal gambling.
PlayUp took Slots+ off the market following the OCCC’s cease-and-desist. It had been a slots-like app attempting to employ the same legal loophole as land-based historical horse racing (HHR) machines. These use anonymized horse racing results instead of random number generation for payouts. They therefore qualify as a form of pari-mutuel betting under federal law.
However, those machines generally only exist where state racing authorities have given them the explicit nod. There is also one legal online HHR product, Luckii. Unlike Slots+, it’s only available in one state and operates with the permission of the Oregon Racing Commission.
PlayUp has appealed the OCCC decision and said last December that it “remains committed to compliance with all Ohio laws.”