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The Rush Street Interactive SPAC: An Underrated Sports Betting Play?

Chris Katje
·2 min read

Rush Street Interactive, which is coming to the public markets via a special purpose acquisition company, could be the next great online sports betting and gaming stock for investors.

The SPAC Deal: Rush Street Interactive owns the BetRivers and SugarHouse brands, which operate in several states with legalized sports betting and online gaming.

Rush Street Interactive operates in New Jersey, Pennsylvania, Indiana, Illinois, New York, Colorado, Michigan, Iowa and the country of Colombia.

Pennsylvania and Illinois have the two largest populations among states with legalized sports betting and online gaming.

The company is set to go public via the SPAC dMY Technology Group (NYSE: DMYT).

Related Link: 7 Current And Former SPACs That Could Be 2020 Election Plays

Strong Market Position: In Illinois, BetRivers is the leading online sports betting company. The brand had a 37% market share for the month of September among the five companies that operated online.

In Illinois, BetRivers currently competes with DraftKings Inc (NASDAQ: DKNG), FanDuel, PointsBet and William Hill.

The last two mentioned only began operating midway through September.

DraftKings had a market share of 32% and FanDuel was third with a 26% market share.

In August, BetRivers led the way with 84% market share as the only operator live for the full month, getting a head start over rivals.

Illinois' September total of $305 million for sports betting made it the fourth most valuable state in the market. The state has seen strong growth and BetRivers is leading the way in market share.

Rival Comparison: From June to August, Rush Street Interactive was the No. 1 online casino in the United States, with 16.3% market share. Betfair/FanDuel was second with a 15.7% share and DraftKings was third with an 11.5% share.

The CAGR estimate for Rush Street Interactive is 65% for 2019 to 2024, which is higher than rivals DraftKings, Gan Limited (NASDAQ: GAN) and Lancadia Holdings II (NYSE: LCA) listed in the October presentation.

The EV/21 revenue multiple for Rush Street Interactive is also the lowest of the four companies compared.

Rush Street Interactive spent 26% on marketing in the third quarter, compared to 155% for DraftKings.

Rush Street Interactive owns its proprietary technology platform, which also helps strengthen its financials for not having to pay a provider.

Financials: Rush Street Interactive announced its preliminary revenue for the third quarter coming in a range of $75 to $77 million.

Revenue in the first and second quarters was $36 million and $65 million, respectively. The company sees 2020 revenue hitting $225 million. Fiscal 2021 revenue is estimated to hit $320 million.

Price Action: Shares of dMY Technology Group were up 8.82% at $13.76 at last check Thursday.

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