$ 1 billion price of TheScore performs an underdog in US playing and public markets

Score Media and Gaming will ring the opening bell on March 16, 2021 on the Nasdaq.

The Nasdaq

Build it slowly.

This is how media company theScore is looking to establish its gambling asset as the Canada-based company is now fully active in the US sports betting and public market landscape.

“This is how we built our success with our TV network in Canada and how we built our success with the app,” said John Levy, CEO of the company.

TheScore is a sports games and media company that believes its mobile app user base is critical to its growth plan to outsource its sports betting business. Levy knows it will be a challenge as theScore lags behind top companies like FanDuel and Barstool Sports. But he welcomes the competition.

“It’s about who wins in the market and who has the best product and who has the best ideas,” Levy said.

The outsider role

65-year-old Levy spoke about his company when he spoke to CNBC about theScore last September. He envisioned the day Canada will expand its sports game and also welcomed theScore’s longshot status in the sector as a whole.

“We’re an outsider,” said Levy. “We’re the most popular and least well-known brand in the US. But in six months, a year, or eighteen months, that won’t be the case.”

TheScore moved to its digital outlet role in 2012 when Levy sold theScore’s broadcast business to Rogers Communications for $ 167 million. He then said that unloading the network would allow theScore to “focus 100% on our digital products” and expand the mobile app.

The score is listed on the Toronto Stock Exchange and was introduced this year in the US on the Nasdaq under the ticker “SCR” after the initial public offering raised $ 183.6 million. The company currently has a market capitalization of $ 1.3 billion.

The mobile app has around 3.9 million users per month and provides users with live results, statistics and news. TheScore makes money with sponsorship and digital ads as well as the app and launched its theScore Bet mobile betting app in 2019. It seeks to raise awareness of the flagged “undervalued” betting app Levy as competitors spend millions on branding.

“They don’t know us in the media or in the betting business. And nobody knows us in the financial markets,” Levy said. “But those who do will be hugely rewarded.”

Score Media and Gaming will ring the opening bell on March 16, 2021 on the Nasdaq.

The Nasdaq

The strategy of the score

The company declined to discuss the Core Bet users, but the app is available in four states, including New Jersey and Colorado. Levy said the company will “take a step-by-step approach to building its user base, giving people what they want, and striving for the longevity of what this company will propose.”

But here too theScore is behind in the US scene. Companies like Penn National-sponsored Barstool Sports App are leaders in this field and are available in states like Pennsylvania and Illinois. Jay Snowden, CEO of Penn National Gaming, told CNBC’s “Squawk Box” that other states like Indiana and New Jersey will be launched in the next few months. New York is also in sight.

Others, including Fox Corporation’s Fox Bet and MGM’s BetMGM, have also gained prominence in mobile gambling in the United States. TheScore must compete against these larger companies and endure policies of getting more states to license the company.

However, it has help from Canada. A bill (C-218) legalizing sports betting for one-off events is nearing completion and Prime Minister Justin Trudeau endorses the legislation. TheScore believes its home market has the potential to grow to $ 5.4 billion and estimates that the Ontario market alone could reach $ 2.1 billion by 2025.

Canadians place over $ 7 billion in illegal wagers as gambling in the country is mostly limited to horse racing, according to Bloomberg.

TheScore said it had a record quarter for its media revenue, generating $ 10.6 million in the first quarter of 2021. Chad Beynon, an analyst at Macquarie Securities, described his stock as “outperforming”. He said theScore plans to own its sports betting technology and that it could add long-term revenue growth.

“We believe this is important, especially for a company like [theScore]which has the ability to curate the content, offer unique bets and deliver in-play bets that represent only 15% of the current US market compared to 75% in the UK, “Beynon wrote.” In addition, this strategy would also lead to lower platform fees (15% of sales), which should enable a faster margin ramp. “

Chris Lencheski, chairman of private equity advisory firm Phenicia, said he likes theScore’s position, especially with Canada going online. Lencheski acknowledged that gambling companies spend millions on branding as they battle for future market share, but added, “I like the fact [theScore] didn’t put a huge obligation on them just because they felt outside pressure to look like something else.

“Often [companies] Say, “We’re going to look just like another company and we’re going to make it bigger and spend more money,” he added, using Quibi as an example. “How many billions of dollars did you put in this thing? And it was done before it started. TheScore made a nice niche for itself.”

John Levy, CEO of Score Media and Gaming, will ring the opening bell on March 16, 2021 on Nasdaq.

The Nasdaq

Have some lunch

But at some point theScore has to decide what it wants to be in the sports games space and how it will grow.

Properties like BetMGM will take advantage of their hotel properties to attract and retain online gamblers. Meanwhile, digital companies like FanDuel and PointsBet are teaming up with sports teams to bolster their brand and seduce users. And Caesars, who bought William Hill for $ 3.7 billion, is also driving its brand forward.

But Lencheski said companies that broaden their niche by providing speed around the user experience and accurate betting odds would be among the top players. He said peer-to-peer sports games could excel, and companies like theScore could benefit from their user base.

But Lencheski warned the dollar average about getting a new customer, and the grip that customer brings will weigh on businesses with little capital. He predicted that mergers and acquisitions between sports game companies would take place in the next 24 to 48 months.

“If it’s less expensive to consolidate and win, we have to spend money,” Lencheski said. “In other words, when it costs more money to find the next customer than to take part in someone else’s offer.”

TheScore was mentioned among early candidates for a possible acquisition. The company declined to comment on CNBC when asked about acquisition rumors.

Again, months ago Levy said this was the plan: grow slowly. But theScore is now on the clock, playing the sports betting game as an underdog.

“We are thinking about becoming and positioning ourselves as an industry leader,” said Levy. “We love to be the outsider because they don’t see us coming. We will destroy them. We will nibble on them first and then we will have their lunch.”

Disclosure: CNBC’s parent company Comcast and NBC Sports are investors in FanDuel.

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