The long-rumored sale of Rush Street Interactive (NYSE: RSI) may come to fruition within the next two months, according to a recent report.
Media reports in March indicated that the Illinois-based gaming company had reached out to several competitors regarding a potential acquisition, with DraftKings (NASDAQ: DKNG) being the only named entity in the group.
While the U.S. sports betting market is largely dominated by FanDuel and DraftKings, Rush Street Interactive presents an attractive takeover target for those looking to increase their market share. In the first quarter, the sportsbook operator reported a positive EBITDA, a 34% revenue surge, and a significant reduction in net loss to $2.2 million from $24.5 million the previous year.
Why Rush Street Interactive Could Be a Target
The list of potential buyers, including or excluding DraftKings, is extensive because RSI provides a valuable entry point into the iGaming industry.
Despite some analysts expressing skepticism about RSI being a takeover target, CEO Richard Schwartz indicated in May 2023 that he was open to mergers and acquisitions discussions.
The company’s valuation has likely increased, with RSI shares up 98% year-to-date and a market capitalization of $2 billion as of July 12. Any potential buyer would need to offer more than this valuation to engage RSI in negotiations.
Assessing Potential RSI Suitors Beyond DraftKings
It would make sense for DraftKings to pursue RSI given its acquisitive nature and focus on expanding iGaming. However, DraftKings has not confirmed any interest in RSI, and some analysts believe the company may avoid acquisitions in the near term.
The OSGA report mentioned “smaller companies looking to increase their presence” as potential buyers, but did not specify any operators. The report also suggested that European betting giant bet365 might be interested, though bet365 has not confirmed any discussions with Rush Street Interactive.
RSI’s largest investor, hedge fund HG Vora, is known for advocating changes at gaming companies and controls 8.79% of the shares. Institutional investors own 28.81% of the shares, while insiders hold 8.08%, according to GuruFocus data.
RSI operates under the BetRivers and PlaySugarHouse brands, offering mobile or retail services in Colorado, Illinois, Indiana, Iowa, Michigan, New Jersey, New York, Pennsylvania, Virginia, and West Virginia, as well as sports wagering in Ontario, Canada.
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