A new trend: Why are gaming companies going private?

Are the days long gone when public trading was the ultimate goal for a start-up?

in depth private public

A gavel, a gong, a bell; the three symbols of a fresh day of trading at the New York Stock Exchange (NYSE). Although the tool itself has changed over the years, the act of the ‘opening bell’ has been solidified across public trading houses - even though Nasdaq doesn’t have a physical trading floor, the house still has an opening bell ceremony each day. That’s how strong it is. 

However, more companies, with some high-profile examples within gaming, are pulling away from this iconic morning routine and instead favouring the quiet life of private equity.

But why are companies in the gambling industry now going (or staying) private and is this something reflected in other industries?

Bally’s

One of the companies debating whether to go private is US operator Bally’s Corporation. Chairman Soo Kim founded a private equity fund called Standard General, through which he has made a takeover bid (but not for the first time).

Kim has made several bids to take the company private, but the most recent one was at $15 per share, while the publicly traded stock was valued at $10. At the time of the bid, Standard General already owned 23% of Bally’s stock.

However, this was met with criticism by some investors who claimed the offer from Kim was undervaluing the company and recommended Bally’s to reject the offer. 

Even as far back as 2018, IPOs brought in $50.3bn in the tech sector, while private equity firms invested $130.9bn

This comes at a time when Bally’s has just announced plans to build Chicago’s first casino as part of a $1.7bn development project, alongside plans for the golf course in New York that was previously owned by Donald Trump. 

It may well suit Bally’s to go private, though. Its share price was down 27.3% over the last year.

When asked about this, the team at Bally’s said: “We’re aware of where the market is pricing us at the moment and it’s a very attractive price.”

Endeavor

One company that just went private was Endeavor, which was acquired by Silver Lake for $13bn. Gaming wise, Endeavor owns both OpenBet and IMG Arena.

Silver Lake confirmed it will purchase Endeavor's outstanding shares at $27.50 per share to take the company private. Notably, this was only a few months after Endeavor merged IMG Arena, so it will now operate under the OpenBet banner. 

This deal didn’t come entirely out of the blue, either, as Silver Lake has invested more than $3.5bn in Endeavor over 12 years. Both parties praised the long-standing partnership between them as one of the reasons Endeavor had grown from bringing in $350m in annual revenue to nearly $6bn in consolidated revenue by the time of the acquisition.

Why are companies going private? 

There are a few reasons why some big gambling companies are going private. 

First of all, when a company goes public, there is a far greater level of administration and bureaucracy. A private company therefore has more control over its business, without having to please multiple shareholders.

Once a company goes private, the business is in the hands of a few select people; either the private equity firm or the family controlling the company. This makes it infinitely easier to make decisions and act on them.

There’s also less volatility from being on the publicly traded stock market, too. The stock market has quite infamous ups and downs, but unless you’ve been living under a rock for the past five years, you’ve probably noticed some global events that affected the economy quite severely. 

If anything, this proves that there’s no set path to success for companies; going public is no longer a symbol of ‘making it’ but should instead be analysed as a viable strategy, rather than the only strategy

One of the biggest positives of being publicly traded, however, is access to capital. It used to be one of the only ways companies could get funding for projects, which is why going public was historically seen as the end goal for many businesses in the past. 

But this isn’t the case anymore. Even as far back as 2018, IPOs brought in $50.3bn in the tech sector, while private equity firms invested $130.9bn.

Are IPOs losing their popularity? 

There have certainly been a few incidents in recent times that are making IPOs seem less favourable to the public eye. For a while, there was a big SPAC trend anyway, where several prominent gaming firms (including DraftKings) preferred special purpose acquisition companies to go public to traditional IPOs.

While that has died down almost completely, the popularity of undergoing IPO does not seem to have risen as equally.

When Deliveroo started its first day of trading on the London Stock Market in April 2021, it became one of the worst IPO launches in history. Shares dropped by 26% and wiped £2bn ($2.53bn) from its market capitalisation. Some people even asked if this was the end of the British IPO market.

On the other side of the pond, the New York Stock Exchange was dealing with WeWork; the company that imploded harder than perhaps any company, ever. There’s far too much in WeWork to even pretend to condense it, but all you need to know is the company was valued at $47bn in 2019, but is now threatened with being delisted from NYSE because it’s fallen under $1 in share value.

As for the esports and sports betting scene, one of the biggest organisations in the world, FaZe, went private on 8 March. The deal was valued at $47m, a fraction of the $725m FaZe was valued at when it went public in July 2022. There are a number of reasons FaZe struggled in the public market, but you’d need more hands than are anatomically possible for one person to point enough fingers at all of the different factors. The short story is: FaZe Clan couldn’t balance what shareholders wanted against what the fans wanted.

That can be a common theme.

Some companies never went public in the first place

Even if the allure of IPOs is dying down, this isn’t going to be a problem for every company. Some of them never went public in the first place. 

Once a company goes private, the business is in the hands of a few select people; either the private equity firm or the family controlling the company. This makes it infinitely easier to make decisions and act on them

Valve is still a private company. MiHoYo, a giant Chinese gaming company that uses gacha mechanics thought about going public, but withdrew its IPO application in 2020; its games had skyrocketed in popularity. 

The biggest example in gambling is bet365, which has been private since it launched in 2000, owned and operated by the Coates family. On the supplier side, Interblock is a huge firm one would assume is NYSE-listed but has remained private, in 2022 being acquired by (you guessed it, private equity) funds managed by Oaktree Capital Management.

If anything, this proves that there’s no set path to success for companies; going public is no longer a symbol of ‘making it’ but should instead be analysed as a viable strategy, rather than the only strategy.

In terms of privately owned ventures, privately owned startups with a value over $1bn used to be called “unicorns” because of their rarity, but in 2022 they hit the 1,000+ milestone for the amount of businesses classed as a unicorn. During 2021, more businesses became a unicorn in that year alone when compared to the holistic number across the previous five years. The Indian Premier League even became a decacorn in 2022, when it reached $10.9bn.

So perhaps we’ll see a new era of company ownership going forward, where gaming companies won’t be afraid to rely on private equity, rather than face the public eye on the stock market. Is it time for more casino and sports betting companies to take a gamble on their products and boot out the shareholders and their opinions for good?


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