Wynn Resorts is looking to sell its online business, Wynn Interactive -operator of the WynnBet app-, at “deep discount” as the sports betting niche faces losses from stiff taxes and costly promotions to lure customers, according to a report by New York Post on Monday. The Vegas-based giant allegedly slashed the asking price to $500 million from a $3 billion valuation less than a year ago.
A Wynn spokesman declined to comment on what he called “market speculation,” stating the business was clear on its last earnings call about the company’s desire to operate the sports business in a way that will create long-term shareholder value, adds The Post. Analysts told the new source logical suitors for Wynn Interactive would be Fanatics and Penn National Gaming’s Penn Interactive.
The report comes less than six months after Wynn presented ambitious plans for its WynnBet brand, including signing up NBA legend Shaquille O’Neal as ambassador. But shortly after, in November, Wynn said it was scrapping plans, disclosed in May, to merge its Interactive division with blank-check company Austerlitz Acquisition Corp., owned by Vegas Knights owner Bill Foley.
“In light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy,” the company said at the time. “In so doing, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022.”
The deal, which would have created a public company with a $3.2 billion valuation, would have provided WynnBet with $640 million in cash for marketing. But the app was on track to burn $100 million in both the third and fourth quarters, a risky bet, according to outgoing CEO Matt Maddox.
“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.”
Wynn’s outgoing CEO Matt Maddox.
Following the scrapped blank-check merger, believed to partly have failed due to the costly promotional spending in the US sports betting industry, Morgan Stanley analysts valued WynnBet at $700 million, predicting the app would only win about a 2.5% share of the North American market.
Aggressive spending tactics have taken over the US market as of late. Industry leaders FanDuel and DraftKings have gone as far as offering $1,000 credits to sign up new members, with Caesars soon joining similar promotions. This has been the case in the New York market, in which operators have launched massive promotions despite a 51% tax rate on revenues.
Analysts, which partly credit the success of the market to the heavy promotion, have voiced concerns on the sustainability of these tactics: promotions are expected to tone down in the mid to long term should operators hope to see profitability in New York. It is believed it could cost between $300 to $500 on average to acquire an online gaming customer.
While Wynn has a New York online sports betting license, it hasn’t yet launched its product in the state. A potential sale could be of interest to operators who haven’t managed to secure a permit in New York.