Was asked what I think of $tdac which intends to close a deal with Lottery.com? The spac has about $165m in cash and we have no idea what the PIPE will look like or the valuation the sponsor is willing to pay.
What we do know? It’s a website lottery.com that both allows you to play online Megamillions and other local lotteries as well as they apparently sell the data for publishing results. The economics of the lottery are the reseller gets 5% of gross sales. Gross sales annually globally are about $200 billion for a profit pool of around $10 billion, most of which is offline at local stores. Let’s say lottery.com eventually gets 10% market share or $1 billion of top line revenues. That sure sounds juicy?
The lottery isn’t exactly a growth business and this is purely a play on the move to online. We do not see any barriers to entry other than a super cool website URL and app. But we wonder whether the OSB companies could add this to their apps without much regulatory difficulty.
The teaser LOI threw out some growth numbers without any specific top line revenues or customer acquisition costs or profitability. We think owning $tdac right here is more a coin toss than a lottery ticket. Our hunch is the final DA will make this deal look mediocre, at a market capitalization that won’t entice new money. Of course we could be wrong but then again it’s the lottery. Use our metrics on how they get paid for when the DA comes out. We will update our view then but for now we remain on the sidelines believing the local store will remain the dominant way people buy lottery tickets.
Rob’s Educated Guesses