SPAC investing is the hottest place to be right now. After the success of Nikola and DraftKings, investors are focused on finding the next triple-digit runner. On June 29th, news dropped about the newest and hottest SPAC investment to get into right now – Landcadia Golden Nugget.
The excitement surrounding Landcadia Golden Nugget is because billionaire Tilman Fertitta will be Chairman and CEO once the merger is completed in Q3. Tilman is worth almost $5 billion and in addition to Golden Nugget, he also owns Landry’s, the NBA’s Houston Rockets, and has his own reality show Billionaire Buyer. It doesn’t get much better when it comes to success and name recognition. A lot of investors have been waiting for the chance to invest alongside Tilman before, but couldn’t because all his companies were privately-owned. Now investors get a chance to invest and that is going to bring a lot of money into the new company Landcadia Golden Nugget.
About Landcadia Golden Nugget
Landcadia Holdings II, Inc. is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses that are co-sponsored by Fertitta Entertainment, Inc. and Jefferies Financial Group Inc.
Golden Nugget Online Gaming, Inc. is a household name throughout the United States and its iGaming business is a well-established leader in New Jersey, the largest online gaming market in North America. GNOG has obtained market access, subject to regulatory approval, to Pennsylvania and Michigan and anticipates launching its online casino brand in each of those new markets in early 2021. It is considered the market leader by its peers and was first to bring Live Dealer and Live Casino Floor to the United States online gaming market.
Landcadia Golden Nugget Transaction Details
Landcadia Golden Nugget will become only the second pure publicly traded online casino company in the US after DraftKings. The transaction is expected to close in the third quarter of this year. Upon closing, Landcadia II intends to change its name to Golden Nugget Online Gaming, Inc. and its Nasdaq trading symbol to GNOG.
The transaction values the combined company at an anticipated pro forma enterprise value of approximately $745 million, or 6.1x GNOG’s estimated 2021 revenue of $122 million.
Landcadia II will be assuming $150 million of GNOG debt and will pay down at closing an additional $150 million of its debt, plus pay prepayment fees, transaction fees, and expenses. Subject to redemptions, there is approximately $321 million currently held in Landcadia II’s trust account. Upon payment of the purchase price, debt repayment, and transaction fees and expenses, the combined company will have at least $80 million on its consolidated balance sheet at closing and an anticipated pro forma equity market capitalization of nearly $700 million.
To say Tilman Fertitta carries a lot of weight and is well-respected is an understatement. Here is a guy that understands business and most importantly how to run a business. Here is what he has said:
“Remember, I’m an EBIDTA – focused guy. Okay? We’re not gonna be going back to the market continuously trying to raise equity and diluting our shareholders… because we’re gonna be generating a lot of cash flow.”
On the investor call, Tilman said:
“Everybody needs to remember that the Golden Nuggett Landry’s is going to have an EXTREME VESTED INTEREST in $GNOG since it’s gonna have 3% ROYALTY IN GNOG’s net gaming revenue. So Golden Nugget is going to continue to do WHATEVER IT CAN do to push them and help them from a revenue standpoint. We have the ability to push anything through, having over 100 MILLION CUSTOMERS a year between all our properties.”
On the customer base of Landcadia Golden Nugget:
“There’s a reason only 5% of our casino floor is a sportsbook, and 95% of our floor is tables and slots. iGaming players stay longer and place more bets, and are 7x more valuable than online-Sportsbetting customers. $700 iGaming vs. $100 Sports betting. They play longer and they generate a higher hold for the operator. Don’t get me wrong, we’re going to enter every market we can with online sports to build our database…to make money on sports…we’re going to be extremely profitable. i-Gaming customers are so much more valuable.”
Online gaming is the future. According to the data released by the New Jersey Department of Law & Public Safety, in the month of May, internet gaming hauled in just under $86 million in New Jersey, an increase of 124.1% over the May 2019 numbers. As the country continues to deal with the second wave of coronavirus and online gaming becomes more accessible, expect more and more bettors to turn to his convenient option for gambling.
Landcadia Golden Nugget vs DraftKings
Comparing Landcadia Golden Nugget to DraftKings is where things get exciting. Landcadia Golden Nugget has a transaction value of $745 million or just 6.1x 2021 projected revenues. DraftKings, on the other hand, has a market cap of over $12 billion on revenues of $323 million and a net loss of $143 million. Why buy DraftKings when you can buy Landcadia Golden Nugget at a much lower valuation and you get a multi-billionaire CEO? This looks to be a no-brainer to us.
Landcadia Golden Nugget is one of the hottest small-cap plays at the moment. According to Robintrack, LCA went from 35 holders to over 7000 in just 24 hours. We expect the Robinhooders to keep piling in and push the price higher. As the word gets out about Tilman Fertita and Landcadia Golden Nugget, there’s no telling how far the stock can run. If you need any evidence, just look at DraftKings or Nikola as examples.
As always, good luck to all (except the shorts)!
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Disclosure: We plan on buying NASDAQ:LCA at the open on June 30th. We can change our position at any time. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article.