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Golden Nugget Is More a Bet on the Jockey Than the Horse

This is my first opportunity to write about Golden Nugget Online Gaming (NASDAQ:GNOG) since the company completed its reverse merger with Landcadia Holdings. Investors who placed a bet on GNOG stock soaring after the SPAC merger was complete have been disappointed. The stock has dropped over 20%.

A man looking at a computer with poker chips on the screen.
Source: rawf8/Shutterstock.com

In my previous articles about Golden Nugget, there are two stories emerging. One has to do with the almost assured growth of online gambling. The other has to do with Tilman Fertitta, the owner of Golden Nugget Casinos.

As InvestorPlace contributor Mark Hake points out, Fertitta does not own GNOG, but his business interests do own a significant percentage of GNOG stock.

And as I wrote in December, Fertitta is at least considering the idea of taking Golden Nugget Casino public along with several of its other interests. Should the deal go through Fertitta would retain about 50% ownership in the newly formed entity.

Online Gambling Is On the Rise

According to Statista, the global online gambling market may reach $92.9 billion in 2023. That’s nearly double its current size of $59 billion. And you can find multiple additional sources that present similar growth numbers.

Keep in mind as well, that I’m specifically referring to online gambling and not the broader online gaming – which includes multi-player video games and the mobile games (like Candy Crush) that is a booming market in itself.

This is a huge market that has many drivers. One of these, cites Linchpin, is that an increasing number of online casinos are allowing cryptocurrency. This adds a level of security, and anonymity to the activity. That lack of access to on-premise casinos was a big obstacle at least early in the pandemic. Still, the ability of individuals to gamble using their mobile phone without some of the additional expenses caused by a casino visit are expected to keep this sector growing for some time.

Live Sports is the Key

As I write this, the United States is two weeks away from Super Bowl Sunday. And although this year’s Super Bowl celebrations will look quite different, it stands to be a big day for Golden Nugget. In-game sports betting will be a key driver of online gambling in the years to come.

It was noteworthy that every National Football League game became an infomercial of sorts for the different sportsbooks. For example, DraftKings (NASDAQ:DKNG) and FanDuel, whose parent company is Flutter Entertainment (OTCMKTS:PDYPY), are forming alliances and sponsorships.

You can have grave reservations over what this means for the future of professional sports. But there’s no question that since the U.S. Supreme Court opened the flood gates in 2018, the major sports leagues have all decided that it’s better to dance with the devil they know.

Dan Zucker of Zucker Media Group had this to say about the connection between fan engagement and in-game betting.

One thing that in-play wagering generates is substantial fan engagement…Anyone who just had a bet that they’re waiting on the outcome of will be significantly more engaged in a game than those people who don’t. The statistics on that has been well documented many times over.

A Convergence of Not One, But Two Bubbles

As Chris Tyler pointed out, GNOG stock may be falling victim to SPAC fatigue. Some analysts believe there is a bubble that is about to burst with the record amount of companies that came to market via the SPAC route in 2020.

Then there’s the fact that the online gambling sector may also be a bubble.  Golden Nugget is not the only company to go public last year, but it was the last. And that meant that speculative investors may have already turned their attention on DraftKings, MGM Resorts International (NYSE:MGM) and/or GAN Limited (NASDAQ:GAN).

To be fair, the sector has room for more than one company. And Golden Nugget is only just entering its expansion phase. The company did just post $318.9 million in gross gaming revenue in New Jersey alone during 2020. If Golden Nugget’s expansion plans go smoothly, the stock could go much higher.

Will Tilman Fertitta Hold Back GNOG Stock?

At the center of all of this is Tilman Fertitta. He owns the NBA’s Houston Rockets. Perhaps Fertitta is trying to separate the team from any possible link with sports betting. Then again, Fertitta’s business interests were particularly hard hit at the onset of the pandemic so this could simply be a way of generating large amounts of cash while the appetite for SPACs is high.

With the possibility that Fertitta will launch another IPO, the latter looks more likely. So, the question is this: Do you believe GNOG stock can grow because of, or in spite of, Fertitta?

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

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.

Article printed from InvestorPlace Media, https://investorplace.com/2021/01/gnog-stock-tilman-fertitta/.

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