The 40-stock JohnWallStreet index finished the month up two points at 1,716. While the modest advance lags the more-than 2% gain posted by the S&P 500 in June, the sports index is up more than 21% year-to-date, compared to a 14% rally by the broad market. The bulk of the index, 23 stocks, finished down in June, led by Genius Sports, which fell more than 23% as the company sold $450 million in shares, including portions held by founder and CEO Mark Locke as well as the NFL. Penn National Gaming (down almost 8%), Under Armour (down 7%) and Madison Square Garden Sports (down 7%) were other leading decliners in the index.
Leading sports stocks to the upside in June was Fubo TV, which rallied 36% in part because it was added to the Russell 3000 stock index. Index addition often buoys stocks because investment funds benchmarked to indexes buy shares. In the case of the Russell, the buying can be substantial, with more than $10 trillion in assets linked to the index. Nike, which crushed its latest quarter thanks in part to the Jordan brand, gained 13% in June, while football-themed real estate developer Hall of Fame Resort & Entertainment rounded out the top three performers with a 10% advance. Sixteen components advanced in the month, with one, Dover Motorsports, finishing unchanged from May.
The JohnWallStreet Sports Index is a 40-stock grouping meant to reflect the state of professional sports. The index is equal-weighted, meaning each component begins as 2.5% of the index’s value, and it’s rebalanced every quarter. As part of this quarter’s rebalancing, Sportico is adding five new stocks to the index.
Leading the way is Ultimate Fighting Championship parent Endeavor Group Holdings. It went public at the end of April, drawing interest from investors including Elon Musk, Michael Dell and former UFC owners Frank and Lorenzo Fertitta. UFC is the primary driver of growth at Endeavor, though the company does have multiple healthy sports-related businesses, including ownership of the Professional Bull Riders circuit and Euroleague basketball. Live events, including part of NFL-founded On Location, and athlete representation, though William Morris and IMG, round out the company.
Michael Eisner-led trading card venture Topps also joins, with the expectation that its merger with special purpose acquisition company Mudrick II will be completed. Topps expects to sell as much as $760 million in baseball cards, candy and other products, compared to $567 million in 2020. The company intends to focus on its core memorabilia business while expanding into new technologies like NFTs. In presenting the deal to investors, Eisner gushingly compared Topps’ business life cycle to where Disney was when he took over that company in 1984. He will control Topps through super-voting shares.
Other SPAC deals in the works have joined the JohnWallStreet index, too. Sports Entertainment is added this period thanks to its pending merger with Super Group, which doesn’t need outside funding to be completed. Super Group is the parent of Betway, a sports bookmaker that expects to tally $1.5 billion in next gambling revenue for this year.
The Todd Boehly-led Horizon Acquisition SPAC is proceeding with a deal to bring Vivid Seats public. Vivid gets close to half its revenue from sports related ticket sales. Boehly has been active in the sports business of late, separately inking a deal to buy part of the L.A. Lakers, and attempting to bring Sportradar public through his second Horizon SPAC. Earlier last month, Sportradar opted to pursue a traditional IPO.
Rounding out the new additions to the sports index is Wynn Interactive, the mobile gambling and sportsbook business of publicly traded Wynn Resorts. It’s being spun off into a separate business through a merger with Austerlitz I, a SPAC led by Vegas Golden Knights owner Bill Foley. Wynn Interactive will still be controlled by Wynn Resorts, but will offer investors more of a pure play into the sportsbook business Wynn aggressively compiled over the past year.
Since the JohnWallStreet Sports Stock Index is capped at 40 component stocks best representing the sports business, the additions mean five other stocks need to be dropped.
Madison Square Garden Networks leaves the index given its pending merger with Madison Square Garden Entertainment. Since the Dolan family controls the voting power of each entity, the merger is almost certain to proceed. Four other components—Adidas, Flutter, Pointsbet and Puma—are being dropped because they are not directly listed on a U.S. stock exchange and have U.S-traded peers that represent their types of business in the index. While OTC stocks can accurately reflect the price of the company as traded on its home country exchange, trading volumes in each of the companies being removed raises the risk that trading behaviors not reflective of the market could skew prices. Serie A soccer team Juventus, which is also traded over-the-counter, remains in the index with suitable volume and the OTC price closely tracking the primary stock listing on the Milan stock exchange.
Sportico’s JohnWallStreet Sports Stock Index was relaunched in August last year at a level of 1,000, meaning it has advanced more than 70% in the 10 months since. Equal-weight indexes reflect a sector’s performance more broadly, compared to price- and market cap-weighted indexes, which tend to be concentrated on a few, highly valued names. To be included in the benchmark index, stocks must be traded in sufficient volume on a U.S. exchange and have a minimum market cap of $50 million. Companies that fail to meet the requirements, experience a significant corporate event (think: bankruptcy, sale) or pivot in strategy away from professional sports may be dropped from the index.
The index exists solely for tracking purposes; we are not encouraging anyone to invest in this specific basket of companies.