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Embrace the Volatility in Golden Nugget Online Gaming

For folks who’ve been watching from the sidelines, the wait is finally over. After merging with a special purpose acquisition company (SPAC), Golden Nugget Online Gaming (NASDAQ:GNOG) finally went public on Dec. 30. So, now you can trade GNOG stock freely.

poker chips and dice on top of a keyboard representing gambling stocks
Source: 9dream studio / Shutterstock.com

For quite a while, though, there was a lot of hand-wringing and speculation about whether the merger would be finalized at all. Six long months after Landcadia Holdings II first announced its plans to merge with Golden Nugget, it all came down to a shareholder vote.

As the anticipation mounted, the stock (at the time known as LCA stock) wiggled and wobbled around. The financial message boards lit up with both optimists and skeptics in full force. But, soon after the merger decision was announced, GNOG stock dropped.

However, does that mean this name is now buying opportunity? Or is this the end of the bull run? That’s the billion-dollar question.

So, let’s rewind and look back at what’s happened with this fascinating stock.

GNOG Stock and Its Stagnant SPAC

SPAC transitions aren’t always smooth, so the anxiety surrounding LCA and GNOG stock in 2020 was completely understandable.

Before June, the share price was practically glued to $10. That’s not unusual for pre-deal SPAC stocks. Typically, investors are simply waiting for the shell company to pick the firm it intends to merge with.

And that’s what happened. The price shot up in late June when Landcadia Holdings II announced it would acquire Golden Nugget. In fact, the press release boasted that “GNOG will become only the second pure publicly traded online casino company in the US.”

But that same press release also teased, “The transaction is expected to close in the third quarter of this year.” In hindsight, that prediction didn’t pan out too well. Nearly half a year later, a virtual meeting was scheduled on Dec. 18 for LCA shareholders to finally vote on the big merger.

At Long Last, We Have GNOG

However, that didn’t quite pan out either. On Dec. 18, it was announced that the vote would be delayed further until Dec. 29.

Somehow, though, the stock price rallied from the $21 area on Dec. 18 to more than $25 on Dec. 29. To this, I can only say that the trading community responds to events (or in this case, non-events) in sometimes odd and unfathomable ways.

But, perhaps investors simply saw the date change as just a delay of the inevitable. After all, more than 99% of shareholders had voted in favor of the merger. The bulls really had no cause for concern.

So, with the reverse merger finally finalized on Dec. 29, GNOG stock started trading on the Nasdaq Exchange. Surely that was cause for celebration, right?

A Drop Without Any Change

Not so much. GNOG stock actually peaked at $26.24 on Dec. 28, then fell steadily over the ensuing trading days, despite even the merger completion. In fact, the stock hit its short-term low of $18.01 on Jan. 4 before settling back near $20 soon after.

Now, I understand that’s it’s typically not a great idea to “catch a falling knife” in the markets. But really, if a stock drops for no compelling reason, that could present a prime buying opportunity.

And from what I can tell, GNOG’s post-merger decline doesn’t appear to be based on any bad news surrounding the company. Nor is the overall online gaming market in any particular trouble. As you might recall from November, voters actually helped decriminalize some forms of sports betting in Louisiana, Maryland and South Dakota.

Plus, there hasn’t been any new competition cropping up lately. The only serious, publicly traded rival that GNOG has right now is DraftKings (NASDAQ:DKNG) and the market has known about DKNG  for a long time.

Bottom Line

So, will you run away from the volatility in GNOG stock, or will you run towards it?

That’s a crucial question that you have to consider if you’re going to trade this stock. Yes, GNOG declined. But it has no major problems on the immediate horizon. So, it may just be the time to embrace the market’s irrationality and grab some shares.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

David Moadel has provided compelling content -and crossed the occasional line -on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2021/01/embrace-the-volatility-gnog-stock/.

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