GAN Giddiness: Investors Go Gaga for Betting Software Stock on Cordish News

Posted on: August 17, 2020, 10:58h. 

Last updated on: August 17, 2020, 01:58h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Gaming technology provider GAN Ltd. (NASDAQ:GAN) is trading higher by more than nine percent Monday. That’s after the company said the “PlayLive!” online gaming business, developed in partnership with Cordish Gaming Group, is operational in Pennsylvania.

GAN Stock Rises On iGaming Deal
Traders bid GAN stock higher today on news of an iGaming deal. (Image: US News & World Report)

Making today’s move in GAN stock all the more curious are at least three tidbits. First, the UK-based gaming software maker announced the deal with Cordish in late May, news that created what was then one of the largest intraday moves in GAN equity following its May 5 initial public offering (IPO).

Second, the British company and Cordish have a relationship that dates back to 2015. Third, specific to the PlayLive! news, GAN commented to this effect on Thursday, Aug. 13 at a Canaccord Genuity industry conference, sparking a 12.65 percent gain in the stock.

GAN successfully deployed the real money gaming operation in just 72 days following the execution of a definitive agreement,” according to a statement issued by the company.

But the 72-day timeline isn’t new news. GAN said as much as the Canaccord conference last week.

Speculation Ensues

GAN stock entered Monday higher by 12 percent over the past week, but lower by 6.19 percent for the month ending Aug. 14.

Today’s pop, occurring on the volume that appears poised to easily eclipse the daily average, erases that monthly loss while fueling enthusiasm for equities with leverage to the booming iGaming theme. New Jersey and Pennsylvania, two states where GAN has footprints, are leading the online casino charge in the US.

Counting Cordish, GAN has three clients in the Keystone State, according to the company. The cloud software maker also has a presence in Indiana and is looking to access new markets, including Illinois, Michigan, and Tennessee, among others.

Just Getting Started

By some estimates, internet casinos in the US could become a $9 billion to $10 billion industry over the next several years. Forecasts like that explain why investors are bullish on related equities and are willing to assign premium multiples to the likes of GAN.

In the case of the UK company, its shares trade at 23.43x sales and 94.67x next year’s earnings, making it expensive by practically any conventional metric.

Market participants are showing a willingness to embrace frothy valuations in the iGaming space, wagering that the success of the business in New Jersey and Pennsylvania, coupled with the need to replenish coffers in the wake of the coronavirus pandemic, will compel more states to embrace internet gaming, sports wagering, or both. In either scenario, GAN would benefit because its products are also used by sportsbook operators.

Another reason investors like GAN: it carries no debt, a remarkable trait for a small-cap growth company.

More catalysts for the stock could be imminent, as the company delivers second-quarter results on Aug. 20. GAN management could take that opportunity to comment on other new business, or update the investment community on the early results from PlayLive!