Wynn Resorts is looking to unload its online sports-betting business at a steep discount as the fledgling niche faces painful losses from stiff taxes and costly promotions needed to lure customers, The Post has learned.
The Las Vegas-based casino giant is quietly shopping its Wynn Interactive unit — operator of the WynnBet online gaming app — and has slashed the asking price to $500 million after floating a $3 billion valuation less than a year ago, a source close to the situation told The Post.
The fire sale comes less than six months after Wynn was publicly readying a splashy spring launch for WynnBet, signing up NBA legend Shaquille O’Neal as a brand ambassador. O’Neal even sold his minority stake in the Sacramento Kings NBA team so he could work closely with Wynn without breaking the league’s gambling rules.
“I am so excited to take WynnBet to new heights,” O’Neal said in an August press release. “Mobile sports betting is having a major moment, and I believe that WynnBet will be a powerful force in the industry.”
A few months later in November, however, Wynn said it was scrapping plans it disclosed in May to merge Wynn Interactive with Austerlitz Acquisition Corp. — a blank-check company owned by Bill Foley, the billionaire owner of the Las Vegas Knights.
In addition to creating a public company with a $3.2 billion valuation, the deal would have armed WynnBet with $640 million in cash for marketing. After revealing that the app was on track to burn $100 million in both the third and fourth quarters, outgoing CEO Matt Maddox signaled he wasn’t interested in throwing good money after bad.
“The market is really not sustainable right now,” Maddox said on a Nov. 10 earnings call. “Competitors are spending too much to get customers. And the economics are just not something that we’re going to participate in.”
Shortly thereafter, Morgan Stanley analysts said they valued WynnBet at $700 million, adding that they only expected the app to win a 2.5% share of the North American market.
Meanwhile, FanDuel and DraftKings, which together control a majority share of the online sports-betting market, have lately dangled credits as high as $1,000 to sign up new members. Caesars has likewise staged aggressive promotions in New York despite a crushing state tax rate of 51% on online gaming revenues.
On Friday, the New York Gaming Commission said mobile sports betting was off to a brisk start in its first week, with more than $600 million in bets taken by Caesar’s, FanDuel, DraftKings and BetRivers. Gaming analysts said that the massive haul was partly the result of “heavy promotion from the operators.”
Wynn has a New York online betting license but hasn’t yet launched its service.
“I personally am surprised at the level of promos we are seeing considering the 51% tax rates,” said Barry Jonas, an analyst at Truist. “I think it has to tone down long-term if there is any hope of seeing profitability in the state.”
It’s a long way from last spring, when online sports betting companies were trading as high as 25 times projected revenues as tech investors including Cathie Wood’s Ark Invest hyped their stocks, arguing that the pandemic was poised to create an explosion in mobile gaming.
Now, even the highest-valued among them are trading closer to six times. DraftKings, the largest listed, pure-play sports-betting company, went from trading in the mid-$50s in May to the low $40s in November. On Friday, its shares closed at $19.46.
A tipping point, Jonas said, was when DraftKings in September made an unsuccessful, $20 billion offer for British bookmaker Entain, indicating it wanted to gain more exposure outside the newer US market.
A Wynn spokesman said the company wouldn’t comment on what he called market speculation and rumor. “We were clear on our last earnings call about the current highly competitive nature of the online sports betting market and our desire to operate that business in way that will actually create long-term shareholder value,” he said in a statement to The Post.
Meanwhile, banking sources said the most logical suitors for Wynn Interactive, which in addition to WynnBet owns Wynn Slots and BetBull, are Fanatics and Penn Interactive. But neither has displayed clear interest, sources added.
That doesn’t mean a deal won’t happen. David Katz, a gaming analyst at Jefferies, notes that most players claim the taxes and promotions, however punishing, haven’t surprised them.
“The operators are constantly telling us they have the mathematical models that give them the intelligence that they are spending money wisely — and the Street doesn’t believe them,” Katz said. “The way the Street sees the future has changed in the last three to six months — there was certainly a lot of enthusiasm but the winds changed swiftly.”
A key question, analysts say, is whether the steep promotions will start to pay off soon. Katz estimates that it costs $300 to $500 on average to acquire an online gaming customer.
“I don’t think anyone knows how sticky customers are,” Katz said. “Time will show who is right.”