Shares of the SPAC buying Genius Sports surged Wednesday, as a bullish analyst report from Craig-Hallum Capital Group said the sports data and technology firm’s market share has almost tripled in two years, to 30%, creating “effectively a duopoly between Genius and Sportradar” in the swiftly expanding sports betting market.
Genius isn’t public yet—it’s merging with a SPAC, dMY Technology II, in a deal all but certain to close this quarter. DMY II’s shares leapt almost $4 yesterday, closing at $20.44, a one-day gain of 22%. DMY II’s units, which consist of a share as well as one-third of a warrant to purchase additional share, rose 25%. Overall, the blank-check’s securities have more than doubled since the first news of Genius’s plan to go public broke in October. Genius shares surrendered some of the gains Thursday, slipping 5% in light trading midday.
Much of the tailwind for Genius Sports is a consequence of the explosive growth expected from the legalization of sports betting, according to the report, authored by Craig-Hallum senior research analyst Ryan Sigdahl. Legal sports gambling, a $30 billion industry today, is projected to reach $50 billion annually by 2025, thanks to trends like in-game and online betting. Genius provides official league data seen critical for in-game betting, because it’s distributed faster and is verifiable. Holding partnerships with more than 150 sportsbook and 400 leagues, Genius is seen as an option for stock investors interested in the overall growth in sports betting. “Why buy one horse when you can own them all?” Sigdahl’s report begins.
Genius and privately held competitor Sportradar are the dominant providers of sports data, used by sportsbooks for gambling as well as teams and leagues for analytics. Sportradar is the larger of the two, with about 40% of the market, while Genius is estimated to control 30%, according to the analyst. Of particular importance to Sigdahl is that Genius appears to have expanded its market share from 11% in 2018, seeing particular success with lower-tier leagues, where it swaps its proprietary software and services for game data. The merger with dMY II, which holds $155 million in cash, should provide Genius with more capitalization to continue to pursue growth. “We believe [Genius] has been able to invest in the business over the years ($110M+ invested in proprietary technology to date) but hasn’t had the ideal level of capital to sufficiently fund its growth plans,” Sigdahl wrote, in part. He placed a price target of $25 on shares. A spokesperson for Genius declined to comment on the report.
On Friday evening, Genius filed its first financials to regulators as part of the going public transaction. In it, the London-based company projected 26% growth for its most recent year, saying 2020 sales were seen coming in at about $145 million. It typically takes companies a few weeks of accounting to finalize recent revenue numbers.
Competitor Sportradar has also been considering going public. Last summer, Sportradar was exploring the SPAC option, but in November, Dealreporter reported the company was prioritizing a traditional IPO with J.P. Morgan and Morgan Stanley, with a possible SPAC transaction as an alternative option.