By the time you read this, and definitely before New Year’s Day 2021, owners of Landcadia Holdings II (NASDAQ:LCA) will have voted on whether the company should reverse merge with Golden Nugget Online Gaming. If the deal goes through — and sources say shareholders overwhelmingly support it — LCA stock will take on the GNOG ticker and thus a new high roller’s adventure will begin.
The merger is especially significant because once it clears the checkered flag, it will make Golden Nugget the second publicly traded online casino company in the U.S. From an industry standpoint, the timing couldn’t be better (even if no casino on Earth has a clock in sight). According to Statista, the global online gambling market is projected to hit nearly $93 billion in 2023.
You could in fact file this one under “cut me some SPAC.” Special purpose acquisition companies — SPACs for short — became the toast of Wall Street in 2020. Another online gaming outfit, DraftKings (NASDAQ:DKNG), used a SPAC to go public in April 2020. Since its debut, DKNG stock has nearly tripled in value. Those who hold LCA stock would surely love to witness a similar outcome. How likely is it they’ll see something that good? Or better? Or worse?
LCA Stock Meets a Houston Household Name
Sometimes a name can mean everything and in the case of Golden Nugget Online Gaming, the famous moniker dates back to the 1940s. Perhaps as impressive is the impresario trying to take the company public. Billionaire Tilman Fertitta parlayed his Landry’s restaurant chain into an empire that includes the NBA’s Houston Rockets (his hometown team) and the Golden Nugget’s five hotel casinos.
Fertitta is also a TV personality and penned the 2019 book “Shut Up and Listen!: Hard Business Truths That Will Help You Succeed.” Check out the book jacket: This is one tough-looking, square-jawed Sicilian American. (As a clueless-looking, slack-jawed Sicilian American, I envy this immensely.)
Anyhow, a man who rolls with a title like that ain’t no wallflower. While this doesn’t fall under traditional stock analysis, I’m betting all Golden Nugget-style that the last thing Fertitta wants is lose face and endure a decade’s worth of “shut up, you didn’t listen” jokes.
Not that anyone is trying to stop him or wants to. LCA stock is on a date with destiny and Fertitta is rolling out the red carpet. Holders of LCA stock have every reason to take a stroll on it, too. In anticipation of the merger, shares have jumped 116% since Nov. 1. There’s still time to make money on this investment, though the GNOG ticker could go live almost any time after shareholders vote.
A Smart Bet, With One Exception
Given that this SPAC has just about served its purpose, let’s turn our attention to the potential of a publicly traded GNOG. Simply put, betting on betting rarely holds this much promise. Golden Nugget Online Gaming’s gross gaming revenue increased 72% in the first nine months of 2020, according to Gambling.com.
Meanwhile, Golden Nugget plans to expand its online operations into Pennsylvania and Michigan in 2021. It became profitable within three years after operations commenced in New Jersey in 2013. It does not take a genius or a clueless-looking Sicilian American to extrapolate the graph and see where all this is headed. For those considering LCA stock, I offer you one word: up.
That said, rare is the day that I can strongly recommend a stock on financial grounds but take a definite pass on it. Strictly speaking, the future GNOG will be a sin stock. And in my case, compulsive gambling hits home pretty hard.
My father spent untold hours and dollars at racetracks and in blackjack pits. By the time I was six, I knew the basics of poker by sitting on his lap in our smoke-filled basement, surrounded by men who belched and bet with equally unabashed fervor. His father initiated him in like fashion. I never caught the gambling jones. Just the side effects.
Believe me. Part of me would love to invest in the company LCA stock becomes and “win some money back from the house,” so to speak. Suffice to say that every investor at some point in the journey must ask themselves if the cash they ante up will fund a product or service they believe in. Or that can make a difference. For some, the answer is irrelevant: Just make money.
As for me? Well, I’ve talked enough about that here and on my shrink’s couch. As I’ve made my decision based on personal principle, you must, too. In the currency of investor dollars and cents, LCA stock is a calculated risk in the right direction. As for the dollars and cents of some sorry online gaming patrons, that’s another story. How and where you place your bets is up to you.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.