Rush Street Interactive Close to Confirming Public Debut, SPAC Deal Values Company at $1.8B

Posted on: July 26, 2020, 09:14h. 

Last updated on: July 27, 2020, 12:39h.

Rush Street Interactive, the online casino business of Rush Street Gaming, is reportedly close to announcing it will go public via a merger with a special purpose acquisition company (SPAC). It is a transaction valuing the gaming firm at $1.8 billion.

Rush Street Interactive SPAC
Rush Street Interactive is looking to go public and an announcement to that effect could arrive as soon as Monday. (Image: The Economist)

Citing unidentified sources close to the matter, the Wall Street Journal reported on Sunday that the iGaming company and blank check firm dMY Technology Group Inc. (NYSE:DMYT) could make a merger announcement as soon as Monday.

Led by former technology executives Niccolo de Masi and Harry You, dMY went public in February, raising $230 million. Shares of the special purpose vehicle (SPV) surged 4.15 percent last Friday on speculation of a deal to bring Rush Street Interactive public, though it faces a tricky road in terms of delivering for investors.

For investors after the acquisition, SPAC returns have been a mixed bag,” said Renaissance Capital in a report.

“The majority of SPACs that have completed acquisitions in 2020 trade below issue (13/22), which is also true of SPACs that completed acquisitions in 2019,” the report continued. “That said, the space is arguably maturing, both in terms of the quality of companies beginning to be acquired and the management teams forming them.”

dMY will use the $230 million it raised in its IPO plus another $160 million contributed by institutional investors, to execute the Rush Street Interactive transaction. Last week, Bloomberg reported the blank check was looking to raise another $150 million to fund the deal. But the Journal puts that number at $160 million and mentions Fidelity among the investors contributing that capital.

It’s not immediately clear when Rush Street Interactive stock will debut or on what exchange it will list.

SPACS + Gaming: Match Made in Heaven

SPACs have been around for decades, but the entities have been scorching hot since last year, serving as the vehicles to bring public high-flying acts like Nikola, Virgin Galactic, and Vivint Smart Home, among others.

The online gaming industry, in particular, is proving to be fertile territory for blank check companies. It’s how DraftKings (NASDAQ:DKNG) went public in April. Tilman Fertitta’s Golden Nugget Online Gaming (GNOG) could become a public company this quarter via a merger with his Landcadia Holdings II, Inc. (NASDAQ:LCA) and there’s talk sports data provider Sportradar is mulling a blank check deal to debut on a US exchange.

The reason many companies, gaming and otherwise, are embracing SPACs instead of the traditional way of going public is simple: time.

It can take between six and nine months for a company to commence a traditional IPO. Conversely, it took DraftKings, as just one example, about four months to debut on the Nasdaq after its reverse merger with Diamond Eagle Acquisition was announced last December.

That efficiency is meaningful at a time when markets are comfortable assigning lofty valuations to online gaming companies. But there are no guarantees that the environment will persist for six to nine months.

Speaking of Valuations…

A merger with dMY will value Rush Street Interactive at $1.8 billion, according to the Journal. That’s more than double the pro forma enterprise value of approximately $745 million estimated on Fertitta’s Golden Nugget Online Gaming.

Under the BetRivers brand, Rush Street Interactive operates online sportsbooks in Colorado, Illinois, Indiana, and Pennsylvania, according to its corporate web site. The company also runs internet casinos in New Jersey and the Keystone State.

When the dMY deal is finalized, Rush Street Interactive should have $230 million in cash on hand, according to the Journal.