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GAN - GameAccount Network


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I was not actively looking for another investment opportunity, but perusing through new IPO/Spin-offs, I found GAN. Typically I wait, as 9/10 times in my experience, IPO's go down at least 25% or more.

 

However, I'm not sure if this will because they moved to another exchange because their prior exchange undervalued and had little liquidity.

 

They provide a very valuable service in a very fragmented market with huge barriers to entry with more regulations coming through from what I see.

 

GameAccount Network is a B2B SaaS company providing end-to-end solutions for online gambling. So far they are experiencing great growth with their US Sports Betting and I think COVID-19 will only increase demand.

 

They're growing revenues by 100%+ and 2019 EBITDA is around $6-7M now, but with current growth rate and other levers, it's not unforeseeable to see GAN trading at Single Digit 2020 EBITDA now. Especially with the tailwind.

 

I'll only have a small position atm, but I can see this becoming a large position when I understand the engine that drives this business/stock.

 

I will look into this further and provide an update, but thought we can look at this together.

 

I only initiated a position, because their position is very unique by switching exchanges, so management thinks they will be valued higher. They only listed recently - on May 1st, 2020 and it seems to be flying under-the-radar.

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This is now my largest position mostly due to the price being up 5x since I doubled down. I've actually done a few podcasts on it which you listen to here:

 

1)

2) https://ericschleien.com/podcast/coronavirus-investing-gan/

3) https://ericschleien.com/podcast/jeremy-raper-credit-based-equity-investing-japanese-stocks-shinoken-gan-nio/

 

You’re a gem!  ;D

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This is now my largest position mostly due to the price being up 5x since I doubled down. I've actually done a few podcasts on it which you listen to here:

 

1)

2) https://ericschleien.com/podcast/coronavirus-investing-gan/

3) https://ericschleien.com/podcast/jeremy-raper-credit-based-equity-investing-japanese-stocks-shinoken-gan-nio/

 

You’re a gem!  ;D

 

It's the CoBF community which is a gem :) I'm just doing my part and contributing where I see opportunity to do so. Hope that gives you a bit more light into the situation and saves you some research time.

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I initiated a mid-size position in GAN when it was still trading on the London AIM and held through the company's IPO on the NASDAQ. I recently sold about half of my stake, as it has run up nicely and I have a strong preference for cash at the moment.

 

I do think that it offers an attractive risk-reward ratio if you believe that the company will be able to successfully diversify its revenue streams. GAN's main risk is customer concentration - they derive a large part of their revenues from contracts with FanDuel. You also have the double-edged sword of the Smurfits' ownership - the CEO alone owns around 10% of the shares and while that aligns incentives, there's also the risk that the Smurfit family treats the minority shareholders as a piggy bank rather than as true partners. I don't think it's a huge worry at this point, but it's something to watch.

 

Overall, I have been pleased with the recent operating results. GAN has a decent moat - there are few pure-play B2B gaming service providers and they have been fastidious in handling the legal aspects of licensing in the various states where they operate. If they continue to execute, I think the results for shareholders will be satisfactory, even from this entry point.

 

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This has been an 8-bagger for me in some of the accounts I manage. I wrote about the company quite extensively to my investors earlier in the year. Happy to share privately with anyone.

 

On an interesting side-note- I have been seeing a lot of commercials in Philly recently for FanDuel. Last few weeks, they come on now all the time.

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Huge runway for growth and has done quite well since uplisting.

 

The real question is whether FanDuel will stick with them long term. Ask most investors and they'll tell you absolutely yes. Ask most people who work in the industry and they'll tell you that there is a very good chance they won't.

 

So far the bulls have won although I know quite a few who have cashed their chips in during the run up.

 

 

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Good points from Sahara and there's definitely a chance it goes down like that. But there's no doubt in my mind that FD will absolutely proactively reevaluate other options/ in house solutions for parts/all of the GAN offering. So the question becomes what % do you put on them actually moving away at least part of their business, if not all?

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  • 2 weeks later...
  • 2 weeks later...
  • 1 month later...

Down 13% AfterMarket

 

Looks like I can pick up some more - not sure why the sell off.

 

I guess because they lost the Fanduel account:

 

The pandemic continues to create some uncertainty around sports gaming for the balance of 2020. In addition, FanDuel deployed their proprietary digital wallet for its sports gaming business, and therefore GAN does not anticipate sports gaming revenues from FanDuel after August 31, 2020.
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Down 13% AfterMarket

 

Looks like I can pick up some more - not sure why the sell off.

 

I guess because they lost the Fanduel account:

 

The pandemic continues to create some uncertainty around sports gaming for the balance of 2020. In addition, FanDuel deployed their proprietary digital wallet for its sports gaming business, and therefore GAN does not anticipate sports gaming revenues from FanDuel after August 31, 2020.

 

This was already most likely going to happen anyway. They did not lose the FanDuel account, just the sports betting which is a very small part of the business. Guidance is still on track for the year and they aren't even including Michigan in their guidance which is a high probability event.

 

Management discusses more detail RE: FanDuel as well as an analyst asked a question about it.

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