After the top executives at Chicago-based Rush Street Interactive sold some of their stocks in the gaming company, speculation arose that a buyout could be imminent.
Some thought RSI might be ripe for a takeover of its gaming assets.
Several factors, however, make it highly unlikely that RSI is either looking to sell or is vulnerable to being taken over by another company.
RSI executives sold a ‘small portion’ of their stocks
RSI owns BetRivers, which is one of eight operators serving the Illinois sports betting market. BetRivers Sportsbook Illinois was one of the original sports betting operators in the state in 2020. It also operates online casinos and would be poised to join that market in the Land of Lincoln if lawmakers legalize iGaming in the near future.
Key stockholders with RSI recently sold some stakes in the company, it was revealed in an earnings call last week. By law, CEO Richard Schwartz and CFO Kyle Sauers are required to disclose any sales of stock. They let go of fewer than 300,000 shares each.
Industry analyst JMP Securities responded to the earnings call and stock sale with calmness. It said the stock sale “suggest[s] to us that any potential sale is off the table,” and the “sale of stock was a small portion of their respective holdings, but points to several underlying takeaways related to M&A (mergers and acquisitions) chatter around the industry.”
Previously, it was speculated that DraftKings might have been considering acquiring RSI. A sale would have sent shockwaves throughout the gaming industry. But last month, DraftKings issued a veiled denial, saying it was “focused on winning the US online gaming opportunity.”
Despite stock dip, RSI earnings trend upward
Rush Street’s stock did not benefit from the news of the stock sale, failing to stabilize amid prior concerns of a sale to another gaming operator.
The stock was recently down from a high of $10.77 on Aug. 1, a 17% drop. That’s an indication of the worry investors had over a potential buyout or sale of the company.
During the earnings call on Aug. 7, Schwartz reported that RSI had experienced 34% year-over-year growth in the second quarter. That resulted in profits of $220 million for the gaming company that owns some land-based casinos, as well as online brands BetRivers, PlaySugarHouse, and RushBet in its portfolio.
This week, RSI is listed at just under $9 per share, which is up from $6.42 on May 1, or a 39.5% jump in value in just over three months.
Another move that may have worried some was when RSI announced affiliate spending cuts in several states. Those states did not include Illinois, Michigan, New York, or Pennsylvania. It also will not change affiliate spending in Delaware, where BetRivers is the sole online sports betting app.
According to the company, it has communicated with affiliates in eight states, explaining that agreements between RSI and those affiliates will cease on Aug. 31.
It appears the decision was made so the company can focus on its most profitable affiliate states, Schwartz indicated in the earnings call.
“The reason why we [sent termination letters to some affiliates in certain states] is ultimately we want to have the flexibility to spend more with affiliates in other markets, make sure we focus on the markets where we get the best ROI. [W]e’re constantly looking at the data and evaluating the right opportunities to deliver the best ROI for us in those markets.”
