The sports betting industry continues to grab Wall Street’s attention.
Rush Street Interactive LP announced on Monday it’s going public via a merger with dMy Technology Group, Inc., a move that will value the new company at about $1.8 billion.
Both companies’ boards have approved the transaction and it is expected to close later this year. The combined company will be Rush Street Interactive, Inc. and will be traded publicly as “RSI” on the New York Stock Exchange.
Rush Street is following the road map laid out by rival DraftKings, which went public via a special purpose acquisition company (SPAC), also known as a “blank check” company, in April.
The deal also positions Rush Street to duplicate what Draftkings did when it went public roughly four months after passing on a traditional IPO (initial public offering), a process that normally takes six to nine months.
With the return of Major League Basaeball in the past week and the NBA returning this week, the sports betting outlook is the brightest it’s been in months.
The deal will give Chicago-based Rush Street Interactive, which was the first to launch an online sports book in four different states, $230 million in cash. It includes an additional $160 million from institutional investors led by Fidelity Management and Research Company.
The Sports Betting Gold Rush Is On
Founded in 2012, Rush Street operates four casinos (NY, Illinois, and 2 in PA) and also runs online sportsbooks in Pennsylvania, Illinois, Colorado and Indiana – with online books in Michigan and Virginia also in the works.
The valuation is 5.6 times the projected $320 million in revenue Rush Street will generate in 2021.
Rush Street Interactive began its foray into online gaming in 2016 with PlaySugarHouse.com, which positioned it to take advantage of legalized sports betting after the U.S. Supreme Court reversal of PASPA (Professional Amateur Sports Protection Act) in 2018.
The total estimated size of the U.S. market for online casino and online sports betting is approximately $33 billion, market research company Eilers & Krejcik and RSI estimate.
“We started RSI in 2012 to create a fun and engaging online experience for the U.S. gaming customer and we now have a great opportunity to accelerate our growth in this dynamic market,” Rush Street CEO Greg Carlin said.
“We are looking forward to investing further in market expansion, product innovation, and growing our talented team.”
Why Not An IPO?
Going public via SPAC is preferable to some companies for a simple reason: market volatility. Companies want to capitalize on their valuation quickly, and it could look drastically different in the normal six to nine months it takes to go public via an IPO.
The strategy of going public via a SPAC is extremely valuable – and popular currently since we are in the midst of a once-in-100-years pandemic. There’s no telling what the market will look like in nine months.
This merger is yet another sign that the online sports betting industry is pandemic proof.
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