Rush Street Interactive Mulls Potential Sale, May Have Contacted DraftKings

Posted on: March 21, 2024, 03:59h. 

Last updated on: March 22, 2024, 10:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of online gaming operator Rush Street Interactive (NYSE: RSI) rallied late Thursday on a report that the company is considering a sale and has reached out to multiple suitors, including DraftKings (NASDAQ: DKNG).

Rush Street Interactive
A Rush Street Interactive advertisement. The company is rumored to be in takeover talks and DraftKings could be a potential buyer. (Image: X)

Citing unidentified sources with knowledge of the situation, Bloomberg reported Thursday that Chicago-based Rush Street Interactive has contacted several potential buyers, including rival DraftKings. The article didn’t mention other firms with which RSI may have had discussions.

The report sparked a late-day rally by RSI stock, which traded as high as $7 before settling at $6.39, good for a 4.41% increase. Shares of the online sportsbook operator are trading slightly higher at this writing in post-market trading.

Backed by strong financial guidance and an enviable iGaming footprint, among other factors, the stock is higher by 42.3% year to date and 96% over the past year, making it one of the best-performing gaming equities over those periods.

Rush Street Interactive Buyout Rumors Aren’t New

Should the Bloomberg report prove accurate, RSI being in discussions to sell itself would run counter to a thesis recently floated by a sell-side analyst who noted that the company probably isn’t a near-term takeover target.

Speculation about the operator being in play isn’t new, however. Takeover talk about Rush Street Interactive dates back to at least 2021 with ESPN previously rumored as a potential buyer. Last year, multiple reports surfaced indicating RSI could be a buyout candidate, and in May 2023, CEO Richard Schwartz said at the SBC Summit North America that he’d keep an open mind should prospective buyers come calling.

While takeover talk about Rush Street Interactive isn’t new, the company is an attractive target. It’s increasingly profitable, carries no debt, and has exposure to the fast-growing Latin America market via Mexico and Colombia, meaning it could be positioned to procure a coveted Brazilian gaming license.

In the U.S., RSI operates under the BetRivers and PlaySugarHouse brands, and is currently available with mobile or retail businesses in Colorado, Delaware, Illinois, Indiana, Iowa, Michigan, New Jersey, New York, Pennsylvania, Virginia, and West Virginia. The firm also offers sports wagering in Ontario, Canada.

List of Buyers for RSI Could Be Long

Rush Street Interactive closed Thursday with a market capitalization of $1.32 billion, according to Seeking Alpha data. That means the operator could be approachable for an extensive list of larger rivals, including DraftKings.

Should RSI proceed with a sale, the price would likely exceed its market value. But a potentially significant premium could be justifiable to prospective buyers, given the operator’s strength in iGaming. That includes a newly cemented monopoly in Delaware.

While RSI is a bit player in terms of online sports betting market share, its internet casino footprint could be attractive to numerous buyers who are looking to cement leadership in that space, such as DraftKings, or those seeking added share in that arena.