Abysmal ResultsAll of what I feared and posted recently came true - currency headwinds, Russia, Switzerland, and Eastern Europe issues, no material contributions from Foxbet in the foreseeable future, and possible lowered guidance.
The biggest issue is that management credibility is shot. After issuing new, lower guidance in May, they come out and lower it AGAIN and by a very large amount. Also, all the issues that they dismissed (Russia, geographic concentration, overpaying for Sky, higher taxes for markets turning white from gray, etc...) ended up happening. Look for TSG to be valued at a lower multiple going forward.
They also forecast $40 million in expenses this year for Foxbet and are now blaming that for some of the partial losses. That bodes poorly for one or more of the following reasons (1) management did not realize what the Foxbet launch costs would look like just 2 months ago, (2) they are trying to make excuses for the poor 2019 performance, (3) Fox took them for a ride.
Also, as I have said numerous times, the US market is a much longer term play. They admited as much today by saying that they won't breakeven till 2022. This means that shareholders can look forward to heavy losses till then. If it costs $40 milion a year at the minimum just to launch in 2 states (and they already are running in 1 of those 2 states), it will cost a fortune once all the other states approve gambling and there is no guarantee of success. Note that I mentioned the same thing the other day about William Hill's heavy losses in the US and I was brushed away.
Now we also get the news that Bet Stars is going to be dead and buried. Yet another failed attempt at rebranding. They spent a lot on marketing this brand, and it is for naught.
Results were very poor across the board. All segments underperformed. This is not an issue about poor PR or communication, this is about a business that has a heavy debt load and has management running it that are more hype than substance.
I sold my shares and am out. I will never invest in TSG again. The stock will see single digits and I foresee another equity raise in the future. After vowing to not dilute shareholders, they've done it twice in 1 year. It looks like dilution is the name of the game for them.