Online sports betting, digital gaming drives Diller-backed IAC’s $1B MGM stock purchase Howard Stutz, CDC Gaming Reports · August 11, 2020 at 7:30 am A more than $1 billion investment into MGM Resorts International by billionaire media mogul Barry Diller’s IAC/Interactive Corp. is not about the gaming giant’s casinos, nor his view that Las Vegas – the company’s primary market – will come roaring back in a post-pandemic environment. Diller told shareholders of IAC Monday that the potential for MGM’s online gaming business – “a portion of its revenue so small that it rounds down to zero” – drove his investment thesis. IAC acquired more than 59 million shares of MGM Resorts over a nine-week period starting at the beginning of June, taking an ownership stake of 12% through some 34 stock transactions. Diller called the ownership stake a “minority position,” but IAC intends to seek a seat on the MGM board. MGM shares closed at $21.65, up $2.62, or 13.77%, on news of the deal. “We believe MGM presented a ‘once in a decade’ opportunity for IAC to own a meaningful piece of a preeminent brand in a large category with great potential to move online,” Diller said in a shareholder letter than accompanied the announcement. “IAC has always been opportunistic with its capital, and if ever there was a time, this moment is unique.” MGM Resorts and United Kingdom-based sports betting conglomerate GVC Holdings partnered to form Roar Digital in 2018, each with an initial $100 million investment. Roar Digital’s BetMGM app is live in seven states and expects to be operating in 11 total states by the end of 2020. In July, MGM and GVC announced a second round of investment into Roar Digital totaling an additional $250 million. “To date, BetMGM ‘s progress has lagged its pure-play digital competitors, though it is expecting to accelerate,” said Jefferies U.S.-based gaming analyst David Katz. IAC Chairman Barry Diller in a 2016 interview His Jefferies counterpart in the U.K., James Wheatcroft, who follows GVC, voiced a bright future for Roar Digital. “News that IAC has invested $1 billion to acquire a 12% stake in MGM will shine a brighter spotlight on the U.S. online gambling opportunity,” Wheatcroft wrote in a research note Monday. “We are bulls on the U.S. online gambling market. We see $19 billion net revenue from sports betting in the U.S. by 2023.” Wheatcroft said states are legalizing sports betting more quickly than expected. “We anticipate that igaming is the next logical step in the legislative process, with casino-oriented MGM well placed to benefit,” he said. Macquarie Securities gaming analyst Chad Beynon noted his $25 per share price target for MGM includes a $4 per share value for Roar Digital, which he views as a disappointment. But, Beynon said, the current figure was not a harbinger of future market share in the burgeoning online gaming market. “We are bullish on U.S. sports betting and igaming,” he said. Eilers and Krejcik gaming analyst Chris Grove agreed that the IAC investment was “a vote of confidence in BetMGM, a vote that could contribute to the brand’s growing momentum in the early days of the U.S. online gambling market.” However, what wasn’t clear was how IAC will be able to assist in forwarding that momentum. He added there is “an interesting question” of the reception GVC will have toward a third party. “The amount of marketing money that will be sloshing around legal online gambling in the U.S. all but ensures that media companies will explore every viable angle into the market,” Grove said. IAC background Diller, 78, founded Fox Broadcasting Co. and USA Broadcasting. He is currently No. 168 on the Forbes 400 with a net worth of $3 billion. He founded IAC in 1995 and is also chairman of online travel giant Expedia, which acquired its holding company, Liberty Expedia, in a $2.6 billion deal in 2019. New York-based IAC is an investment company with extensive experience in media and online commerce. Its portfolio includes Vimeo, Dotdash, and Care.com, among others. Through a majority stake in the online company Match Group, IAC controls popular dating platforms, including Tinder, OkCupid, and Match.com. IAC also has a majority ownership of ANGI Homeservices, which includes HomeAdvisor, Angie’s List, and Handy. Included on the IAC’s board are Chelsea Clinton, vice-chair of the Clinton Foundation and the daughter of former President Bill Clinton and former Secretary of State Hillary Clinton, and Michael Eisner, the former CEO and Chairman of the Walt Disney Co. MGM Investment IAC CEO Joey Levin called the MGM investment a unique opportunity. The gaming giant saw its entire U.S. portfolio of two dozen resorts in six states closed starting in mid-March in response to the coronavirus pandemic. Only one regional casino – Empire City in New York – is still closed, and all but two of the company’s casinos in Las Vegas – Park MGM and The Mirage – have reopened. Diller suggested Las Vegas, even if it must wait until a COVID-19 vaccine is developed to fully reopen, will recover with the help of “a new NFL team, a new stadium, a drivable destination, and months of pent-up demand (driving) a powerful resurgence.” As for MGM, Diller said, “we will be a minority investor in MGM, but given the size of our financial commitment, we’d welcome the opportunity to contribute to MGM’s success in any number of areas.” He noted MGM “is an aspirational brand, which could be delivered with daily accessibility and offer gaming consumers (including the 34 million M-life Rewards members) a wider range of services, both physical and digital, than any competitor. And MGM, with its highly capable joint venture partner GVC, has only just barely begun to deliver these products.” Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.