DMYD Jumps 40%: Why Its Merger With Genius Sports Just Got a Huge Boost
As sports and sports betting continue to go digital at a breakneck speed, and accurate, timely sports data becomes the foundation of multiple companies’ profitability, Genius Sports is going public through a merger with a SPAC (special purpose acquisition company), dMY Technology Group II (NYSE: DMYD).
Though the deal was announced last October and Genius Sports filed its registration statement on January 15, a new wrinkle just developed after the National Football League (NFL) signed a contract with Genius Sports on Thursday. Here’s what it could mean for the stock and IPO.
Why DMYD Is up 40% on the Genius Sports NFL Deal
Announced on Thursday, April 1, right before Good Friday shut down the markets a day early before the weekend, the NFL inked a partnership with Genius Sports. With the SPAC merger still pending (and expected to close on April 20), the news made dMY Technology Group’s shares skyrocket. At the close of trading on April 5, they had jumped $40.76% from Thursday’s close.
The deal makes Genius Sports the “exclusive distributor” of the NFL’s “play-by-play statistics” and, more importantly, “the League’s official sports betting data feed to media companies and sports betting operators globally, including the U.S., where legal.” Genius, in other words, will be the sole pipeline through which online sportsbooks such as DraftKings Inc. (NASDAQ: DKNG) obtain the information they need to handle betting on NFL games.
Internationally, Genius Sports will also hold the rights on supplying overseas sports betting companies with live NFL audio-visual feeds, turning the company into a keystone of operations for foreign sportsbooks carrying the popular games in this regard, too.
The NFL’s press release describes the new contract as “multi-year” but doesn’t provide an exact timeframe. However, CNBC got a tip from an anonymous insider saying the partnership will last at least 4 years and be worth as much as $1 billion. Sports Business Journal reports different information, with a 6-year deal costing Genius Sports $120 million annually. $60 million will be paid in cash according to this report, with the other $60 million being in equity, giving the NFL a direct stake in Genius. With the partnership, Genius ousts Sportradar, the previous partner and exclusive rights holder, which paid $20 million a year for the privilege.
What the NFL Contract Could Mean for Sports Betting IPOs
With the deal now sealed, the question is whether Genius Sports made a savvy choice or if it accepted a hugely inflated price for the deal that won’t pay off in the long run.
Sportradar—another company angling for a SPAC-funded public debut, shied away from the partnership, apparently unwilling or unable to pay six times its current rights fee. As the NFL’s official sports betting data feed partner up until the April 1 announcement, Sportradar has an insider view of the actual worth of the partnership to its top and bottom lines, and clearly judged the arrangement as not worth $120 million per year, a potentially bearish indicator on the Genius deal.
Genius Sports already had a solid SPAC merger lined up, with an expected $1.5 billion valuation once the SPAC merger is finalized and Genius starts trading under its own ticker. With shares of DMYD trading at $22 per share, investors are clearly excited about the deal and bidding up Genius’s value beyond that funding valuation.
The $120 million annual rights fee is a major expense for a newly public company to absorb for the next 6 years. However, if CNBC’s informant is right about $1 billion in potential income from selling data and audio-visual content to digital sportsbook companies planetwide over the next 4 years, this amounts to $250 million in revenue annually, slightly more than double the outlay on the rights fees to the NFL.
The high price Genius is paying for NFL access is something of a risk (perhaps even a gamble). Yet, given that Genius already has betting data distribution rights for approximately 200 properties including Major League Baseball (MLB) and the National Basketball Association (NBA), this is probably a piece of bullish good news for investors in DMYD.
Once the merger closes—with an expected completion date of April 20—DMYD is expected to trade under the ticker symbol GENI. The sports betting IPO market is red-hot with DraftKings using a SPAC to go public last year. A FanDuel IPO might also be underway that would spin it off from parent company Flutter.
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