Bettors probably recognize PointsBet. It’s a publicly traded sportsbook company and an international one at that. Bettors may not recognize Sportradar, but they’ll know its work. It sells league data to sportsbooks, which lets those sportsbooks offer live in-game betting. Sportradar is also a big company, and it’s getting ready to go public. But it’s not taking the traditional IPO route. Instead, it’s going to be bought by a different company so it can go public. It sounds like a convoluted scheme in a bad movie, but it’s not. It’s a type of investment company that’s being used more often.
Special Purpose Acquisition Companies
Most people start companies to make money by selling a product or providing a service. However, investors can start a special type of company that lets them buy a company and take it public. That special type of company is a Special Purpose Acquisition Company–an SPAC.
Here’s how SPACs work. First, the SPAC has its own IPO to raise enough money to buy another company. Then the SPAC takes whatever company it bought public. Investors usually have two years to buy a company or everyone who put money into the SPAC gets their money back. That makes SPACs great for investors. Investors can get their money back if the venture goes bust. They can also get the newly public company’s stock at a cheap price. It’s a great way to cash in on a company they believe in.
How Sportradar Could Go Public Through An SPAC
There’s a tentative agreement for Sportradar to be bought and taken public by a SPAC. Sportradar has been valued at $4-10 billion. (One of the ways analysts can tell that this is a tentative agreement is the difference in valuations is the GDP of Kosovo.) It’s still early, but if the SPAC buys Sportradar, then it’ll become a public company.
However, negotiations are ongoing. If Sportradar doesn’t like the SPAC’s terms, it can choose not to go public through it. There’s still room for Sportradar to decide that it wants to conduct a traditional IPO.
How PointsBet’s IPO Compares
An IPO–initial public offering–is when a private company sells shares of its company to the public. It’s also the first time the company is listed on the stock exchange, so it’s a big day for the company. PointsBet had its IPO in June 2019, when it opened with a $2 stock price. It was similar to being purchased by a SPAC. Underwriters valued the company, figured out how many shares to issue, and what price to issue them at. SPAC investors do something similar.
However, going public through a SPAC can be faster and it comes with investors who are in it for the long haul. As Crunchbase points out, a company’s share price can change up until the night before a company’s IPO. A SPAC acquisition can offer more stability going into the actual IPO. They’re both valid ways for a company to go public.
Why More SPACs Are Popping Up
Sports betting is a brand new industry with companies that are becoming big enough to go acquire smaller companies or go public. In fact, both companies we covered in this article made big acquisitions. In mid-March 2021, PointsBet bought Banach Technology, which is a software company focused on in-play betting. A week or so later, Sportradar announced its deal to buy Synergy Sports, another sports data company.
But investors want to buy equity in the big companies doing the buying. Since big companies are growing big enough to make big acquisitions like these, investors are scrambling to buy equity in these big companies. Investors’ long-term value will come from stakes in companies that will out-perform the rest of their industries. Sportradar seems to be one of the companies that investors have their eyes on. However, as the sports betting industry matures, we’ll see investors target more gaming companies to take public, add to their portfolios, and ultimately profit from for years to come.