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Online Gaming Company Rush Street (RSI) Draws Bullish Flows Amid M&A Chatter

by | Sep 29, 2021

Rush Street Interactive (RSI) interesting small-cap that has drawn a lot of bullish flow recently including buyers of 1125 January $25 calls on 9/28, 1500 April $22.50 calls on 9/24, and 1500 April $17.50 calls on 9/3. The October $17.50 puts also seeing sellers recently. Shares have run higher recently on M&A rumors and now consolidating in a nice bull flag above the 8-EMA. A breakout above $20.50 has room to run to $24-$25. RSI jumped sharply in November/December when SPACs saw a lot of hot money and has since pulled back. The $4.28B company trades 10.35X sales and 11.85X cash. RSI is an online casino and sports betting company with real-money casino, online and retail sports wagering, and social gaming services. RSI has a leadership role in the US online casino market with strong market access and continually entering large and rapidly expanding markets. They have first-mover advantage into some key markets like Pennsylvania, Indiana, and Latin America. The company sees a number of growth catalysts including geographic expansion, leveraging attractive player-level economics to increase market share, product diversification, and tuck-in acquisitions. Longer-term, the online casino market remains robust with average time spent online almost double that used for sports betting while average customer generates about 3X more revenue than the average sports bettor. On 9/15, Action Network noted that sports retailer Fanatics had met with Rush Street Interactive (RSI) and Sweden’s Betsson to execute its sports betting operation plan. The article also suggested that RSI could be acquired. Analysts have an average target for shares of $21.50 with a Street High $34. Wells Fargo starting at Neutral on 9/14 as they think Rush Street has executed well with its predominantly iGaming centric approach/strategy, but sees an increasingly competitive environment over the next 12-18 months, with larger companies focusing on iGaming, which will put pressure on smaller/midsize platforms. Benchmark is a believer in the rumors about Fanatics noting that acquiring Rush Street would provide Fanatics immediate market access and live operations in key online sports betting and online casino markets while the former could leverage the latter’s database of sports fans to accelerate user acquisition. Short interest is 7.75%. Hedge fund ownership fell 15% last quarter. HG Vora a top buyers with 3.25M shares. In March, a director bought $100K in stock at $20.33.