As the US iGaming space hots up, many of the top operators are looking for ways to rapidly scale and bolster their finances in order to leverage the huge opportunities on the table.
Wynn Interactive, the online division of land-based operator Wynn Resorts, is among the market power players and earlier this year announced it would undertake a SPAC to access more capital.
Read more: To SPAC or to IPO
Fast forward to November, however, and Wynn Resorts made a major u-turn announcing it would put the brakes on plans to spin off its online division.
Below, we take a closer look at how it has all played out.
What was initially planned?
In May 2021, Wynn Resorts said that its sportsbook and online casino division would go public via a merger with Austerlitz Acquisition Corp. The companies would have had an expected combined value that surpassed $3 billion had the merger gone through.
At the time, Wynn Interactive Chairman and Wynn Resorts CEO Matt Maddox said:
“We are confident that this transaction will unlock the tremendous potential of Wynn Interactive to further accelerate growth and enable the business to capture the massive opportunity in North America.
“Bill Foley [Austerlitz Founder] is the ideal partner to ensure continued success – his track record with business combinations, extensive experience growing marquee consumer brands, and partnering to maximize value in businesses like ours will be invaluable as we continue scaling.”
Had the merge gone ahead, Wynn would still have had 70% of the voting rights. Moreover, Austerlitz would only have had 42% ownership of Wynn’s betting platforms.
Why did Wynn Interactive make a U-turn?
2021 has been an intriguing year for the US online gambling space, and Wynn likely made its decision to back out for several key reasons.
The first reason surrounds the sustainability of the current approach being taken by most tier-one operators which is to spend huge sums on marketing and customer acquisition.
When announcing Wynn’s earnings for the third quarter of 2021, Maddox said:
“The market is really not sustainable right now. Competitors are spending too much to get customers. And the economics are just not something that we’re going to participate in.”
Instead, Maddox said Wynn was “focused on building a long-term business that’s sustainable, that is not losing a lot of money”.
For Wynn, it seems that taking a considered approach to acquiring players and at lower CPA and with a high lifetime value is the route to long-term success, compared with the spend big, spend fast approach of some of its rivals.
While Wynn will undoubtedly lose market share in these early days, it has plenty of brand equity that it can cash when the operator believes the market is more mature and a sustainable, long-term online business can be built.
As WynnBet CEO Chris Billings said one the termination of the merger – “WynnBET’s best days lie ahead of us.”