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Bettor Excitement Doesn’t Spare Online Gaming from Critical Investors

Look for successful and well-capitalized gaming companies to swoop in.

Gambling is all about risk-taking, and early buyers of online platform shares have lost their shirts.

October is the peak season for sports. Baseball playoffs are underway. The NFL and college football seasons are in full swing, hockey has returned, and it will not be long before the NBA teams begin competing for a championship.

Online gaming sites have turbocharged the action, as wagering only intensifies and enhances the experience. Sports betting has been around since athletes began competing, but legalized online gaming is still in its infancy.

As sites compete for gamblers, they offer many options, including individual game wagers, multi-game parlays, bets on individual performance, fantasy teams, in-game betting, and more. Bettors have an unlimited arena for participation.

But bettors have been the winners, and the sites that enable betting have not done so well. Wagering on companies like DraftKings ( DraftKings Inc. - Class A - $0. 0.66 (0.04261%)  ) and PENN Entertainment ( PENN Entertainment Inc - $0. 0.85 (0.02426%)  ) has been a losing proposition in 2022.

Gambling is all about risk-taking, and early buyers of online platform shares have lost their shirts. Those holding shares in DKNG and PENN might have achieved better results betting on sporting events than on the two companies since their March 2021 highs.

Sports betting is in full swing in October and continues up and through the peak of the betting season — football playoffs and March Madness. The Super Bowl in early 2023 is one of the leading annual betting events. Gamblers can even get action on the coin toss! March Madness in NCAA basketball lasts one month and has 67 different games on which to wager over one month. The Kentucky Derby and Triple Crown Races attract interest and substantial gambling receipts.

DKNG’s Collapse

When DraftKings burst onto the scene, its stock rose to $74.38 in March 2021. The company’s shares were at $13.21 on October 21, down by 82.2%. Jim Chanos, a leading short seller, has made a mint on his short DKNG position. Chanos claimed the company was overvalued because the business model is flawed, and sports betting is an unattractive low-margin business with little opportunity for differentiation. In March 2022, when DKNG shares reached a low of $14.97, he said, “Things are getting worse, not better” for the company.

Penn Entertainment Shares (PENN) shares have also been ugly. They reached a new high of $142 in March 2021 but fell to $30.43 on October 21, 78.6% below the high. PENN shares continue to make lower highs and lower lows.

Online gaming companies have spent fortunes on customer acquisition, offsetting any earnings. The money spent will benefit the eventual buyers. Look for successful and well-capitalized gaming companies to swoop in and take over DKNG, PENN, and other online companies at bargain basement prices.