Scientific Games Could Have Upside With Spinoffs Of Lottery And Sports Betting Businesses

A leader in casino games, state lottery and sports betting technology announced a plan to unlock shareholder value Tuesday morning.

What Happened: Scientific Games Corporation SGMS announced a strategic review to unlock shareholder value that could result in the spinoff of several business units.

The company intends to divest its lottery and sports betting businesses. The business segments could be spun off via traditional IPO, go public via SPAC, be sold off, or be combined with another business.

The ultimate goal of the moves is to unlock shareholder value and invest in the largest growth opportunities, according to the company. The company also believes the lottery and sports betting segments are best positioned to grow as independent businesses.

“We believe these steps will enable us to capitalize on the high growth potential of each of our businesses, including their expanding digital content offerings and platforms, unlocking value for shareholders, customers and employees,” Scientific Games CEO Barry Cottle said.

After the divestitures, Scientific Games will have gaming, iGaming and SciPlay businesses that the company believes will deliver value for shareholders.

The company does not plan to provide further updates on the plan and could decide to keep the businesses.

Related Link: New York Could Soon Legalize Sports Betting, A Look At Potential Winners And Losers 

Why It’s Important: Scientific Games has a deal with WynnBet in states that include Indiana, Virginia and Tennessee in a partnership with Wynn Resorts, Limited WYNN.

Scientific Games has the OpenSports platform that provides scalability for sports betting partners.

“Three new state launches in quick succession showcases the huge craving for sports betting experiences on the biggest sporting events throughout the U.S.” Scientific Games SVP Cathryn Lai said.

Scientific Games announced the acquisition of SportCast in May in a move to provide additional technology, services and content for sports betting partners.

SportCast is a leader in sports betting player engagement and developed the original BetBuilder product that allows players to build bets across multiple markets on a single game, according to Scientific Games.

More than 12,000 bets per second for multiple global sports can be completed with SportCast’s technology, which uses proprietary cloud-based technology and machine learning models.

Sportcast has more than 50 brand partners that include PointsBet, SkyBet, Entain, 888 and BetMGM, a joint venture from Entain ADR GMVHY and MGM Resorts International MGM.

First-quarter revenue for Scientific Games was $729 million, up 1% year-over-year. The company’s gaming segment revenue of $244 million was down 23% year-over-year due to casinos being impacted by the pandemic.

Lottery revenue of $248 million grew 17% year-over-year in the first quarter. The company’s SciPlay revenue of $151 million was up 28% year-over-year in the first quarter.

SGMS Price Action: Shares of Scientific Games are up 4.90% to $79.69 on Tuesday at publication. Shares of SGMS are up 83% year-to-date.