The race to attract new listings is heating up as difficult capital market conditions are affecting IPO activity across the iGaming industry.
Although many investors remain upbeat about opportunities in the iGaming space, the sector is not immune to the effects of high inflation, rising interest rates and the threat of a global recession.
Last week, Playtech decided not go ahead with its plan to publicly list Caliplay, the company’s joint venture with Mexico-based operator Caliente Interactive, citing the rising cost of capital as the primary reason.
Meanwhile, a Pitchbook article pointed out that Elon Musk’s decision not to buy Twitter was just the beginning and that “deal regret” is suddenly everywhere, but “nowhere more obviously than in the SPAC market”.
As IPO momentum continues to slow, competition among listing locations is intensifying.
The Financial Times reported recently that bankers and exchange officials in the UK are using the June sell-off in US-listed groups to boost their efforts to promote London listings and convince companies not to go public overseas.
US sports betting expert Chris Grove: “I don’t think there’s a general rule of thumb that can be applied, but I’m not sure that Sportradar or Genius would be demonstrably better off being listed outside of the US.”
Based on data from Dealogic, the FT concluded that large European companies that list in the US have consistently underperformed compared to domestic US listings, as well as peers that remain in Europe. These companies have been badly hit by the recent stock market downturn.
These events have ended the narrative that the US has delivered superior valuations, according to one London Stock Exchange official.
Although most publicly traded iGaming companies have decided to list in, or at least near, their home markets, a select number of non-US companies have opted to go public in the US: Sportradar, NeoGames and Gambling.com are listed with Nasdaq in the US, while Genius Sports and Super Group are on the New York Stock Exchange.
“Generally speaking, there’s an advantage in being listed as close to your primary growth opportunity as possible,” Chris Grove, early-stage investor, multi-exit founder and strategist focused on the US sports betting and online gambling sectors, told iGaming NEXT.
“If that’s the US online gambling market, then a US listing is probably superior to a Stockholm Nasdaq listing. US investors are likely to be more in tune with the opportunity than Swedish investors.
“How superior, and whether it’s worth the extra cost and effort, is a company-by-company decision. And major US listings can be punishing for sub-scale companies,” he adds.
“I don’t think there’s a general rule of thumb that can be applied, but I’m not sure that Sportradar or Genius would be demonstrably better off being listed outside of the US,” he concluded.
Nasdaq head of European listings Adam Kostyál: “Nasdaq has a unique offering for fast-growing gaming companies, providing them with venues to list on both sides of the Atlantic.”
Sportradar, the sports technology company headquartered in Switzerland, went public in New York in September of 2021 and has since fallen 57.6% (8 August), while Genius Sports’ stock has dropped almost 80% year-on-year.
Meanwhile, Super Group has lost 35% since it began trading on the New York Stock Exchange on 28 January 2022 and the stock of NeoGames is down 68.2% year-on-year.
Gambling.com Group is the exception to the rule, with 16.7% share price growth year-on-year.
Nasdaq, as a global exchange operator, is reluctant to compare Europe and the US as there are benefits to both territories.
“Nasdaq has a unique offering for fast-growing gaming companies, providing them with venues to list on both sides of the Atlantic,” Adam Kostyál, Nasdaq head of European listings, told iGaming NEXT.
“Companies can start their public journey on our First North Growth Market with more flexible listing requirements, before potentially transitioning to the Main Market in one of the countries we operate in as they mature. Companies with global ambitions can also choose to switch to the Nasdaq in the US.”
Meanwhile, Nasdaq’s First North Growth Market, based in Stockholm, became Europe’s hottest market to raise funds for growth companies in the first half of the year, the FT highlighted.
Companies on Sweden’s junior market have raised £1.6bn to date this year, compared with £1.5bn on London’s AIM, the traditional go-to market for small- and medium-sized companies.
While the numbers are a far cry from the £9.5bn raised on AIM in 2021, which was almost double the £5.4bn raised on First North over the same time period, Stockholm appears more resilient to the current market conditions.
Neil Shah of the London Stock Exchange: “Companies across all stages of their growth cycle are welcome in London, you don’t need to be a unicorn to list here.”
Although the total raised on both exchanges will most likely be considerably lower by the end of this year, London’s efforts to attract both issuers and investors to its capital markets seem to be needed more than ever in the face of increasing competition from the US and Europe.
Sharing a pitch for potentially public companies with iGaming NEXT, Neil Shah, director and tech sector specialist for equity primary markets at the London Stock Exchange, said: “The London Stock Exchange is home to almost 2,000 companies, a third of which are either headquartered or have the majority of operations overseas.
“Companies across all stages of their growth cycle are welcome in London, you don’t need to be a unicorn to list here and our companies benefit from access to UK and global investors with no valuation, liquidity or research discount and often lower costs of going and staying public.
“We look forward to helping more founders access ongoing capital and scale their business on the London Stock Exchange, from wherever they are in the world,” he added.