The National Football League is now the largest American owner of equity in Genius Sports, controlling about 7.7% of the business after a new batch of warrants vested last week.
Under a four-year licensing deal that made Genius the sole gatekeeper of NFL data last year, the league immediately received 11.25 million exercisable warrants in the company. Last week a further tranche of 4.25 million warrants became exercisable under that agreement, according to a regulatory filing from Genius. All the NFL warrants are exercisable for a penny each, meaning even at Genius’ recent $4.30 share price, the NFL sits on a $66 million profit.
“It’s smart strategy for Genius to provide equity to the most powerful sports entity in the U.S. market,” said Jed Kelly, senior equity analyst who follows Genius at Oppenheimer & Co., a brokerage firm. Providing equity both aligns the league’s interest with Genius’ and also means the company has to spend less cash on the rights.
A Genius Sports spokesperson declined to comment. A representative for the NFL didn’t respond to a request for comment.
Vesting of the new warrants vaults the NFL past New York mutual fund giant Fred Alger Management as the largest U.S. shareholder. Alger owns 12.76 million shares in Genius, equivalent to 6.3% of the business. Cathie Wood’s celebrated tech-focused ARK Investment Management follows, with 5.3 million shares, according to Securities & Exchange Commission data collected by Fintel.io.
There are three shareholders larger than the NFL: Apax, a London private equity firm that invested in 2018, controls 60 million shares and three seats on the board of directors, followed by Genius founder and CEO Mark Locke, who owns 21.6 million shares. Australian fund manager Caledonia holds 18.4 million shares. Right now the NFL doesn’t technically own any part of Genius, since all of its investment is through warrants. But the distinction is academic, since the shares can be acquired immediately.
And the league’s stake is only getting bigger: Next April, the NFL will see another 2 million warrants become exercisable under the Genius agreement. It can then acquire four million more warrants under the league’s ability to twice extend the licensing agreement another year, to 2026 and then 2027, according to regulatory filings. Acquiring all those warrants would give the NFL 22.5 million overall, which would make the it the largest “outside” shareholder of Genius.
The NFL and other leagues are finding themselves among the largest owners in sports data and analytics firms under licensing deals that see them taking equity in addition to licensing fees. The NBA has 3% of equity in Sportradar, worth $127 million at market prices, under a similar warrant agreement with that company. The NHL owns $18 million of Sportradar stock with rights to more than double its stake in the future.
The companies have come under some criticism for the prices paid for exclusive data deals, primarily from sports book customers wary of higher prices. The whole sports betting stock sector has been under pressure because of concerns over costs of data and customer acquisition, as well as a broad market move away from growth stocks. Genius shares peaked at $24.93 last May and have slumped along with the sector, down to the low $4 area lately. Still, the drop is likely temporary, according to market watchers.
“We’re still really bullish on sports betting,” said Oppenheimer’s Kelly, in a phone call. “The leagues have embraced it as a way to drive fan engagement. If you look at the numbers, it’s growing even faster than we thought when the industry started getting investor attention two years ago. The leagues getting equity in these data providers is probably the best way for them to generate immediate value for their data.”