PlayUp Could Depart US Market as it Scrambles for Cash
Australian sportsbook operator PlayUp may consider departing the US sports wagering market as the company struggles to find a buyer and faces a need to raise capital.
An ad for PlayUp on the Prudential Center hockey rink used by the New Jersey Devils. The gaming company may depart the US market. (Image: New Jersey Devils)
Currently, PlayUp offers mobile sports betting in Colorado and New Jersey, confirming its bit player status on the US sports wagering scene. News of the gaming company’s potential departure from this country emerges about a week after it said it was nearing a deal to sell its US operations to an unidentified publicly traded company. That transaction was expected to close in the current quarter.
Sources close to PlayUp told the Australian Financial Review the gaming company could consider leaving the US as it seeks to raise $10 million to stay afloat. Australia-based Evolution Capital is managing the capital raise.
PlayUp CEO Daniel Simic told the Australian Financial Review that the capital raise is being conducted via the operator’s BetClub business due to entanglements created by the company’s relationship with now defunct cryptocurrency exchange operator FTX Holdings.
FTX Relationship Making Life Hard on PlayUp
PlayUp may be paying for its ties to FTX. Last year, the company landed $35 million investment from the crypto exchange in the form of a convertible note that entitled the investor to an equity stake in PlayUp.
As part of that agreement, if PlayUp raises capital beyond $10 million in another transaction, FTX’s stake in the gaming company increases. That would benefit FTX clients because consultants and lawyers are working to recoup assets in an effort provide some compensation to those that suffered losses in the FTX collapse.
However, PlayUp shareholders wouldn’t benefit from FTX’s position in the company increasing. As it is, FTX’s involvement with PlayUp is already a drag on the sportsbook operator because it’s been a cause of concern for creditors and companies considering a buyout of the US operations. Speaking of such tribulations, PlayUp had an agreement in place for a reverse merger with IG Acquisition Corp., a special purpose acquisition company (SPAC) controlled by Bradley Tusk.
That deal fell apart in January after IG claimed PlayUp didn’t provide needed financial documents. The gaming company confirmed as much, but also noted it believed the blank-check firm didn’t have the capital necessary to execute a $350 million transaction.
PlayUp Not First Aussie Company to Struggle in the US
The US is the newest largest sports wagering in the world and it’s also the most fiercely competitive as evidenced by the rise of increasingly mighty duopoly maintained by FanDuel and DraftKings.
While there are other credible players, such as BetMGM and Caesars Sportsbook, smaller companies such as PlayUp have struggled to keep up with the spending needed to acquire and retain customers here.
In fact, PlayUp isn’t the first Australian gaming operator to wave good-bye to the US to focus on more profitable operations in its home country. PointsBet (OTC: PBTHF) is doing just that with the $225 million sale of its US unit to Fanatics, which was announced last month.
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