Investor Jim Chan bullish on sports betting stocks, says U.S. bettors suck
Prominent short seller Jim Chanos is now bullish on sports betting stocks, citing bizarre bets that take advantage of the U.S. sports betting shortage.
Kynikos Associates founder Chanos recently transitioned his hedge fund into a family office structure and in December 2021 announced a short position in DraftKings (NASDAQ: DKNG ), saying the operator's business model "Flawed".
His firm initiated a DraftKings short sale in May 2021 and covered it in July 2022, netting $10 million. That's a smart move, as the sports betting provider's shares have nearly doubled since August 5, 2022, and have more than tripled since the start of the year.
Chanos recognized the promise of sports betting stocks, telling the Financial Times that he "underestimated" how "bad" US bettors were at sports betting. Additionally, short-sellers point out that bookmakers like DraftKings see opportunities to increase profits through exotic, high-odds bets, attracting bettors looking for big payouts.
Chanos mentioned in-game betting and parlays in the same game
DraftKings and competitors like BetMGM and FanDuel have been able to increase profits and increase profitability through services like live game betting and parlays.
For years, American sports bettors have preferred betting on the money line, team or total score before a game. But they are increasingly relying on in-game betting. This isn't necessarily good for their account, but it's positive for the operator. In almost every major team sport, in-game odds can vary from game to game — touchdowns, home runs, etc. These fluctuations usually affect the interests of the casino, not the bettors.
Likewise, same-field betting is becoming increasingly popular among American bettors. Usually, combinations of the same game fulfill what is implied: multiple rounds of bets on the same event. In a hypothetical example using a football game, a bettor could choose a moneyline bet, any touchdowns by a specific player, and over/under on wide receiver yards.
Chanos told the Financial Times that in-game betting and parlay betting expose bettors to terrible odds and present a better-than-expected business model for operators.FanDuel and DraftKings, which hold a duopoly in the U.S. sports betting market, are among the gaming companies that have discovered an emerging gold mine in the same jackpot pool.
There is room for significant growth in live betting in the United States, which currently accounts for an estimated quarter of revenue. In more advanced sports betting markets such as continental Europe and the UK, this can be as high as 80%.
Chanos is not touting any specific gaming stocks
Throughout his career, Chanos has never shied away from naming stocks in which he held a short position. But in an interview with the Financial Times, he did not directly name his favorite sports betting stocks.
DraftKings is the best-known pure-play name in the group currently trading in the United States. But next month, FanDuel parent company Flutter Entertainment (OTC: PDYPY ) will list on the New York Stock Exchange (NYSE). These may be the types of stocks Chanos uses to participate in the growth of U.S. sports betting, but he has yet to confirm this.
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Source: www.casino.org
