ADVERTISEMENT

Creator of Surging Sports Betting ETF Sees Next Boom in Europe

Creator of Surging Sports Betting ETF Sees Next Boom in Europe

Investors who fear they missed out on this year’s stock-surge in U.S. sports betting companies should look at their more undervalued peers across the pond.

That’s the message from the creator of the only sports betting and iGaming exchange traded fund, who says that European companies are trading at a big discount compared to their U.S. counterparts.

“There’s a huge valuation gap between iGaming and online betting focused companies in Europe and in the U.S.,” Will Hershey, CEO of Roundhill Investments and creator of the Roundhill Sports Betting & iGaming ETF, said by telephone.

The 31-year-old CEO highlighted stocks like the south European island of Malta-based Kindred Group Plc and Kambi Group Plc as companies that American investors aren’t likely to be familiar with but have key roles in the sports betting ecosystem.

In the U.S., Boston-based DraftKings Inc. has surged 157% since it went public this year, while Barstool Sports Inc.-minority owner Penn National Gaming Inc. rallied 171% this year in the midst of bubbling excitement for the broader online sports betting industry as the Covid-19 pandemic depressed activity at traditional casinos. Despite the optimism, DraftKings isn’t expected to turn in a profit until 2025 while Penn National won’t generate pre-pandemic earnings until 2022, data compiled by Bloomberg show.

Hershey’s ETF, commonly-known by its ticker BETZ, is made up of 37 stocks that span the globe and the industry from consumer facing app operators to the companies that keep their platform running. “Part of our value as a passive ETF is allowing people to invest in a William Hill or PointsBet, something they couldn’t do otherwise on a U.S. exchange,” Hershey said.

Creator of Surging Sports Betting ETF Sees Next Boom in Europe

BETZ is up 36% from its June 4 debut, tripling the return for the S&P 500 over the same stretch and besting gains for the S&P’s Supercomposite Casinos & Gaming Index by threefold. While the ETF’s market value of $141 million is a blip compared to the hundreds of billions of dollars made up by household names like the world’s biggest tech ETF, Invesco QQQ Trust Series 1 (QQQ), it does offer a passive way to play a growing industry.

Still, companies such as Kindred and Kami have market values that are only a fraction of their U.S. peers, limiting the ability to draw investments from larger funds.

The U.S. sports betting industry, which is far less developed than overseas in places like Europe, is expected to reach $300 billion by 2030, according to Evercore ISI analysis, meaning the canvas for the market is very much blank. While Hershey compared the current euphoria to a “land-grab or gold rush-type of environment where it’s all about being first to market” in states that newly legalize betting, he expects the industry to look more fragmented like it is in Europe.

“There are going to be multiple winners” across the industry from front-end sportsbooks that are “the most sexy or household names” to those running the platforms that enable the technology to seamlessly work, Hershey said.

©2020 Bloomberg L.P.