Wynn scraps plan to spinoff interactive division

US gambling giant Wynn Resorts and Austerlitz Acquisition Corporation I have called off a deal that would have taken the Wynn Interactive subsidiary public on the Nasdaq Stock Exchange.

This comes as Wynn, along with eight other operators, received approval for online sports betting in New York.

Wynn scraps digital spinoff

Last week, it was announced that Wynn Resorts and Austerlitz mutually agreed to terminate their previously announced agreement and plan of merger, which contemplated the combination of Austerlitz I and Wynn’s subsidiary Wynn Interactive.

Craig Billings, CEO of Wynn Interactive, said: “With our continued roll out of product features and planned new state launches, including New York, we remain excited about WynnBET’s future. 

“As we discussed on the Wynn Resorts, Limited third-quarter earnings conference call earlier this week, in light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy. In so doing, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022. WynnBET’s best days lie ahead of us.”

Back in May, Wynn agreed to spin off its Wynn Interactive division in a deal that would combine the special purpose acquisition company (SPAC) Austerlitz with the interactive division.

The combination would see the online division split off into a separate entity and go public on the Nasdaq exchange.

At the time, Wynn said that Austerlitz’s $640m in cash reserves would “help fuel growth”.

Back when the deal was announced, the combined company was estimated to have a post-transaction value of $3.2bn, more than four times the revenue projected by Wynn Interactive in 2023.

Changes to marketing strategy

Last week, during a Q3 earnings call, it was revealed that Wynn would be reducing its spending on marketing its sportsbook until the US betting space calms down.

According to the call, it was revealed that the digital business is on track to lose roughly $200m across the third and fourth quarters due to launches in new states. As a result, the operator plans to scale back spending dramatically next year.

During the call, Wynn’s outgoing CEO Matt Maddox said: “The market is really not sustainable right now. Competitors are spending too much to get customers. And the economics are just not something that we’re going to participate in.

“We are focused on building a long-term business that’s sustainable, that is not losing lots and lots of money. So we are shifting our strategy to think about the long term, and think about cash preservation.”

Billings explained that WynnBet will focus on its core strengths which include brand and customer databases.

Billings said: “There are certainly opportunities for us to do ROI-positive acquisition. It is really a question of scale. If you are not trying to drive headline market share with large-scale brand spend, performance spend, hyper-aggressive customer promos, there are absolutely opportunities to grow the business over the course of the longer term.”