Golden Nugget Online Gaming Eyes IPO in Transaction Reminiscent of DraftKings

Tilman Fertitta’s Golden Nugget Online Gaming (GNOG) is eyeing an initial public offering (IPO) via a blank check firm co-owned by the billionaire. That marks the latest in a series of companies opting for direct listings over traditional IPOs.

Golden Nugget Online Gaming Goes Public
Tilman Fertitta is taking Golden Nugget Online Gaming (GNOG) public in a SPAC deal. (Image: CNBC)

Landcadia Holdings II,  Inc. (NASDAQ:LCA), a special purpose acquisition company (SPAC) co-owned by Fertitta and investment bank Jefferies, will acquire Golden Nugget Online Gaming. When that transaction closes in the third quarter, the SPAC will take the Golden Nugget Online name and switch its ticker to “GNOG” while remaining listed on the Nasdaq.

There’s already a well-known, recent SPAC template in the online gaming industry: DraftKings (NASDAQ:DKNG). The daily fantasy sports (DFS) firm and sportsbook operator eschewed the old school IPO route, opting for a reverse merger with SPAC Diamond Eagle Acquisition Corp. and betting technology provider SBTech.

In addition to DraftKings, Fertitta’s GNOG follows other well-known companies, including aspiring electric vehicle maker Nikola (NASDAQ:NKLA), space travel firm Virgin Galactic (NYSE:SPCE) and Vivint Smart Home (NYSE:VVNT), in using blank check entities to become publicly traded companies.

Transaction Similarities With DraftKings

Landcadia II will assume approximately $150 million in GNOG liabilities. Allotting for the purchase price, debt repayment, and fees and expenses related to the deal, the combined company will have $80 million on its balance sheet and an expected “pro forma equity market capitalization of nearly $700 million” when the transaction closes.

The transaction values the combined company at an anticipated pro forma enterprise value of approximately $745 million, or 6.1x GNOG’s estimated 2021 revenue of $122 million,” according to a statement issued by Landcadia.

Fertitta, who also owns the Houston Rockets, among other businesses, will become GNOG chief executive officer. As is the case with DraftKings, GNOG will have a dual share class structure whereby Fertitta retains super voting rights.

DraftKings co-founder and CEO Jason Robins controls 92.5 percent of the Class B stock in that company, which carries 10 votes per share compared to one vote on each share of the more heavily traded Class A stock. Landcadia didn’t reveal how many votes per share Fertitta’s units will have or what percentage of that equity he’ll own.

Positive Signs, Including Profits

GNOG, which says it’s the first internet gaming company to launch live dealer games in the US, currently operates in the fast-growing, hyper-competitive New Jersey online casino market. The firm entered the Garden State in late 2013 and turned a profit in 2016. Last year, GNOG generated net income of $11 million.

That could be music to the ears of investors, because many companies eyeing IPOs, regardless of industry, struggle to turn profits immediately after going public.

Landcadia said GNOG will, pending regulatory approvals, enter Michigan and Pennsylvania, the latter of which is home to a booming iGaming market, in 2021.

At this writing, shares of the SPAC are higher by 28.53 percent on volume that’s already 100x the daily average.

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