Investors may get two chances to make money on the same company, with the Golden Nugget casino. The first chance came at the end of December when shareholders of Landcadia Holdings II, a special purpose acquisition company, voted to merge with Golden Nugget Online Gaming; the second chance will come if the land-based Golden Nugget casino also follows with an IPO.
Hitting a Jackpot
Golden Nugget investors were to vote on the acquisition on December 18 at a special stockholders meeting, but that was delayed because not enough shareholders voted. While 99% of the votes cast were in favor of the merger, more shareholders were still needed to vote.
The Golden Nugget Online Gaming merger finally went through, becoming only the second pure, publicly traded online casino in the US, after DraftKings; DraftKings went public in April following a $3.3 billion merger with Diamond Eagle Acquisition and SBTech.
Golden Nugget Online Casino Dominates the Garden State
The Golden Nugget online casino is the biggest in New Jersey, raking in more than $289.4 million in revenue in the final months of 2020. That figure is 80% more than the same period last year and 60% more than the Borgata online casino, which came in second.
But not all of that revenue came from Golden Nugget Online Gaming, since four brands operate under the company’s gaming license. As well as Golden Nugget Online Gaming, there’s also SugarHouse, Betfair, and Bet America. While the state’s gaming regulators don’t break down the revenue contribution of each brand, Golden Nugget Online reported third-quarter gross gaming revenue of nearly $29 million, net revenue of $25.9 million, both up 93% from last year. However, the operating income was also 92% higher than last year.
Does the Success of Online Casinos Make Land-based Casinos a Good Investment?
Billionaire entrepreneur Tilman Fertitta, the owner of Golden Nugget, also heads up Landcadia, but also the Landry’s, Del Frisco’s, and Bubba Gump Shrimp restaurant chains. Fertitta also owns the Houston Rockets, basketball team.
After growing his companies through the use of debt, taking both the online and the land-based casinos public would help him to pay down that debt. As a result, Fertitta is interested in bringing his casino and restaurant empire public through an IPO.
The fact is, Atlantic City’s casinos have been hard hit during the coronavirus shutdown. It came in a distant eighth in revenue, ahead of only Bally’s. Golden Nugget Atlantic City also trailed far behind in sports betting revenue.
Sports betting has kept Atlantic City’s casinos afloat, despite the ongoing COVID-19 shutdowns and restrictions. The revenue leaders in New Jersey have been DraftKings and FanDuel.
Golden Nugget Atlantic City has only generated a little more than $1 million in revenue year to date from sports betting. In contrast, the FanDuel retail sportsbook at The Meadowlands racetrack generated $173.3 million.
Online Casinos are Hot Right Now
From an investment standpoint, when Golden Nugget Online Gambling goes public, it looks like it could be a good bet.
Online gambling as a whole, especially sports betting, has made New Jersey the leader in internet and mobile gambling. Golden Nugget Online Gaming has plans to go live in other states, including Pennsylvania and Michigan, which will further boost revenue.
The Fertitta’s land-based casinos, on the other hand, might make more money for Fertitta than for investors. This is because land-based casinos all over the world are still hampered by the coronavirus shutdowns, mask mandates, and social distancing requirements; for example, casinos in New Jersey are restricted to operating at 25% capacity, dramatically reducing profits.
The fact is, Atlantic City’s casinos are having a hard time, as is Las Vegas. Investors would do better with online gaming than with land-based casinos.