When Landcadia Holdings (NASDAQ:LCA) signed a merger agreement with Golden Nugget Online Gaming on June 29, LCA stock took off like a rocket. At the time, the mania over special purpose acquisition companies, or SPACs, was in full swing.
An American online real-money casino, Golden Nugget Online Gaming, was to become “only the second pure publicly traded online casino company in the US.” The unmentioned but obvious other company in the category is DraftKings (NASDAQ:DKNG).
While the ticker symbol to watch for now is LCA, it’s important to know that when the merger is finalized sometime this month, the newly formed company will be called Golden Nugget Online Gaming, not Landcadia.
Furthermore, the firm’s new stock ticker symbol will be GNOG, and the shares will trade on the Nasdaq. Still, investors can buy LCA stock while they’re waiting for the changeover. But should they buy it? That’s the million-dollar question, so let’s hone in on this red-hot e-gaming stock and see if it’s worth betting on.
A Closer Look at LCA Stock
Prior to the merger announcement, Landcadia’s shares were quietly sitting near the $10 area. There wasn’t much buzz surrounding Landcadia at the time, so the trading volume on the stock wasn’t robust.
However, both the trading volume and the share price of LCA stock picked up when the merger was disclosed to the public. Within a few days, the shares spiked above $16.
Next came the cooling-off phase, as LCA stock declined to $11 and change by early August. Yet that’s not the final chapter of the story. Faithful investors were rewarded, as Landcadia soon rose to its previous peak. By early September, the stock was back up above $16 again.
Still, it’s important for the bulls to keep the momentum going. The last thing they need now is another dip back towards $10 or $11.
Interestingly, the SEC filing announcing the merger reads like an advertisement. In it, we learn that Landcadia is technically called “Landcadia Holdings II,” as if it’s a movie sequel.
Moreover, we get the not-entirely-objective opinion of Landcadia II Co-Chairman Rich Handler that Golden Nugget Online Gaming “is one of the best positioned companies to capitalize on this massive online gaming opportunity in the US.”
You’ll probably be hearing more from Fertitta in the future as he’ll serve as Golden Nugget Online Gaming’s chairman and CEO. So far, Fertitta sounds like a hype man and a big talker.
He’s been saying things like, “Golden Nugget is one of the most time-honored brands in the gaming business today,” and, “When customers hear the name Golden Nugget, they know they are dealing with a trusted online gaming business.”
Living Up to the Hype
So, will Fertitta’s company live up to his expectations? Admittedly, Golden Nugget Online Gaming is a known entity among e-gambling fans. Furthermore, the company’s net income exceeded $11 million last year.
That’s impressive considering that the Covid-19 pandemic hadn’t reached America yet in 2019. The online gaming craze didn’t really shift into high gear until the novel coronavirus forced people indoors, and bored, unemployed people took to e-gambling.
In addition, Fertitta’s hype job probably isn’t a con job as he did back up his braggadocio with some compelling stats. For instance, he reported that New Jersey is an $800 million “iGaming market” and that the company’s combined potential market in Pennsylvania, Michigan, and New Jersey is estimated to be $2.5 billion.
In other words, it appears that Golden Nugget Online Gaming is targeting a compelling opportunity in lucrative markets. Will the company compete successfully with DraftKings? That remains to be seen, but risk-tolerant investors might be willing to gamble on it.
The Bottom Line
There’s nothing wrong with having a hype man at the helm of a company. What matters is whether the company can execute.
We’ll find out soon enough whether Golden Nugget Online Gaming can live up to the hype. If so, the owners of LCA stock should enjoy meaningful profits.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.