Benzinga | Nov 27, 2020 08:40AM EST

Sports Betting ETF Co-Founder Talks SPACs, Undervalued Foreign Exchange Plays

Roundhill Investments CEO and co-founder Will Hershey joined the Benzinga YouTube show "SPACs Attack" to discuss several sports betting special purpose acquisition companies and some lesser-known sports betting pure plays that trade on foreign exchanges.

Hershey On Sports Betting SPACs: Benzinga asked Hershey about several sports betting SPACs that trade in the Roundhill Sports Betting & IGaming ETF (NYSE:BETZ).

Lancadia Holdings II (NASDAQ:LCA) is merging with Golden Nugget Online through a SPAC. The SPAC does have some red flags, Hershey said, with the SPAC sponsor taking an existing company public and adding some debt.

Golden Nugget Online is a pure play on online casinos, not sports betting, he said.

"[The] ARPU for iGaming is multiples of what it is for sports betting," Hershey said, adding that iGaming has higher margins.

dMY Technology Group (NYSE:DMYT) is taking Rush Street public in a SPAC deal that will bring the No. 1 iGaming player in the U.S. public, Hershey said.

"Rush Street is really interesting," the Roundhill CEO said.

Rush Street has its own proprietary technology. Unlike rivals like DraftKings Inc (NASDAQ:DKNG), Rush Street is EBITDA-positive, Hershey said, adding that Rush Street is spending minimally on advertising while also growing its user base and market share.

Hershey likes that Rush Street has a presence in both iGaming and sports betting.

A SPAC that is owned in both the BETZ ETF and the Roundhill Esports & Digital Gaming ETF (NYSE:NERD) is Flying Eagle Acquisition Corp (NYSE:FEAC), which is merging with Skillz.

Skillz has patented technology to help game developers match users in a new betting platform similar to daily fantasy sports, Hershey said. Skillz is creating a second layer of monetization for game creators.

Skillz could be an acquisition target for a large gaming company down the road given their patent, and the key could be partnering with higher-tier games to unlock more value, the Roundhill CEO said.

Related Link: 10 Stocks To Watch After Sports Betting Is Legalized In Louisiana, Maryland, South Dakota

Foreign Exchange Sports Bet Picks: Hershey also discussed exposure to foreign-traded sports betting stocks in the Roundhill Sports Betting & iGaming ETF.

Kambi, which trades in Sweden, is a picks-and-shovels play for the sports betting market that's similar to GAN Limited (NASDAQ:GAN), he said.

"Kambi is a great place to start."

Similar to GAN, Kambi is a business-to-business provider that helps companies with back-end solutions. Kambi counts Penn National Gaming (NASDAQ:PENN) and Rush Street as customers, Hershey said. Kambi is more of a pure play on the sports betting market, while GAN is focused more on the iGaming side.

Evolution Gaming, another Swedish gaming company, is a B2B play that is pioneering the live casino segment.

"[It's] taking streaming and introducing traditional table games," Hershey said.

The company will allow people to engage with real cards at traditional table games with livestreaming.

Aussie-listed PointsBet, which has a partnership with the Comcast Corporation (NASDAQ:CMCSA) unit NBC Sports, is another favorite of Hershey's.

PointsBet has "pretty unique technology," he said.

FanDuel is the top brand in the United States sports betting, with a market share of 46%. The company is owned by Flutter Entertainment (OTC:PDYPY). Flutter trades at lower multiples than DraftKings despite its market-leading position.

"I think Flutter is worth a look," Hershey said

Kindred Group, which used to own Kambi and owns the popular Unibet brand, was a foreign sports betting stock brought up by a viewer of Monday's show.

Kindred is one of the top holdings in the BETZ ETF and trades at a massive discount to its U.S. peers. Unibet is pushing into the U.S. markets, and Hershey said it represents a "compelling story."

Kindred trades at a reasonable multiple and valuation, and the "growth kicker is the U.S. story," he said.