The amendments will inject a healthy sum into Canada’s capital markets
One of the biggest things to happen in sports this summer has nothing to do with playing the game. Rather, it has to do with playing the odds. According to the Canadian government, every year Canadians place over $14 billion in illegal wagers. That is, until 29 June 2021 when Bill C-218, entitled An Act to amend the Criminal Code (sports betting), received royal assent. Once the amendments come into force, provincial governments and licensed persons will be permitted to offer bets on races, fights, single sport events, and athletic contests.
What does the lawful provision of single-event sports betting have to do with capital markets? Think about it: “Licensed persons” includes publicly traded sports betting operators, including Score Media and Gaming, DraftKings, Flutter Entertainment, and Penn National Gaming, to name a few. Thus, the amendments will allow provincial governments and sports betting operators to reap billions in revenue. It is safe to assume that some of the $14 billion will make its way into capital markets in North America and globally.
Score Media and Gaming operates the number one sports app in Canada and the third most popular gaming app in North America. Its brand recognition gives it the best chance at succeeding as a sports betting platform in Canada. In the last three years, Score Media and Gaming saw its share price grow 108% each year, notwithstanding a corresponding annual 0.5% decrease in revenue. This trend shifted after Bill C-218 was announced, as the company achieved record-breaking earnings, generating $10.6 million in the first quarter of 2021.
In May, Score Media and Gaming’s stock was trading at $16 per share, up from $6 in May 2020. Once Bill C-218 passed, the share price hovered at around $20 to $28. In August, industry giant Penn National Gaming announced its plans to acquire Score Media and Gaming for $2 billion in August. As a result of Penn’s announcement, share prices almost doubled to $40. The transaction is expected to close in the first quarter of 2022.
Based on the increase in market activity in the sports betting space, it seems that investors are already excited about the prospect of this new $14 billion market. It will be interesting to see how the legalization of single-event sports betting in Canada affects capital markets in North America over the next couple of years. Will those billions of dollars find their way into the market? Only time will tell.