Rush Street Interactive Considering Public Life in Deal with SPAC dMY Technology

Posted on: July 24, 2020, 10:22h. 

Last updated on: July 24, 2020, 02:28h.

Rush Street Interactive could be the latest in a growing line of gaming technology firms to become publicly traded via a deal with a special purpose acquisition company (SPAC).

Rush Street Interactive Mulls SPAC
Rush Street Interactive could be the latest gaming name to go public in a SPAC deal. (Image: Wall Street Journal)

Citing unidentified sources, Bloomberg reports that the developer of real money and social casino games is in talks with dMY Technology Group Inc. (NYSE:DMYT) about a merger that would pave the way for Rush Street Interactive to become a public company.

Combining with a blank check firm rather than a traditional initial public offering (IPO) is an increasingly popular avenue for companies in myriad industries to go public. In the gaming arena, the move was validated by DraftKings (NASDAQ:DKNG), which debuted as a public company in April following a reverse merger with SPAC Diamond Eagle Acquisition.

dMY Technology Group raised $230 million in a February IPO and is reportedly in discussions to raise another $150 million. There could be something to the Rush Street Interactive chatter because when dMY went it public, it told investors it would focus on deals with purveyors of mobile applications and mentioned gaming as a potential area of interest.

The Company intends to specifically focus on companies that have created compelling mobile app experiences with significant growth in segments such as gaming, entertainment, education, e-commerce, dating and health and wellness,” according to dMY.

Shares of the special purpose vehicle (SPV) are higher by more than four percent in midday trading. It’s not immediately clear what the valuation assigned to Rush Street Interactive is, but dMY previously said it’s targeting companies in the range of $500 million to $1.5 billion.

Striking While the Iron’s Hot

Rush Street Interactive is the online gaming arm of Chicago-based Rush Street Gaming, the operator of four casinos under the Rivers brand.

With iGaming and social casinos taking off in the wake of the coronavirus pandemic, premium valuations are being assigned to companies in these spaces, prompting experts to say combinations with SPACs make sense as avenues for speeding up entry to public markets.

That’s a strategy that could make sense for Rush Street Interactive because the company has some of the traits investors crave when it comes to internet gaming equities, namely, footprints in fast-growing markets. Rush Street Interactive controls a regulated online casino platform in New Jersey, one of the fastest-growing iGaming markets in the US.

Additionally, the company has multiple social casino offerings and operates online sportsbooks in Colorado, Illinois, Indiana, and Pennsylvania — all markets where sports wagering is taking off.

Expect More SPAC Deals

Blank check companies are taking financial markets by storm this year, led by high-profile transactions, such as DraftKings, electric vehicle maker Nikola, and space travel firm Virgin Galactic.

To this point in 2020, SPACs raised $17.1 billion via IPOs, accounting for 40 percent of all US IPO volume, according to Renaissance Capital. The research firm points out that with 48 blank check firms went public this year, topping all sectors for new offerings.

With five months left in 2020, SPACs already shattered previous highs for capital raised in a calendar year and, in the second quarter, topped the record for deals as measured by proceeds.

The gaming industry is in on the trend in a big way. In addition to DraftKings, Tilman Fertitta’s Golden Nugget Online Gaming (GNOG) is expected to go public sometime this quarter via a merger with Landcadia Holdings II, Inc. (NASDAQ:LCA). Additionally, there are rumors that sports data provider Sportradar is looking to go public via a tie-up with an unidentified SPAC.