Codere Online Trouncing De-SPACed Gaming Competition

Broadly speaking, it’s been a rough year for gaming equities, including those that came public via reverse mergers with special purpose acquisition companies (SPACs), but Codere Online Luxembourg (NASDAQ: CDRO) stands out.

The Spanish sportsbook operator, which went public on Dec. 1, 2021 following a combination with blank-check firm DD3 Acquisition Corp. II, is up 170% year-to-date. That’s easily the best showing among US-listed gaming stocks that are the product of SPAC deals, a group including DraftKings (NASDAQ: DKNG), Rush Street Interactive (NYSE: RSI), and Super Group (NYSE: SGHC).

Within and outside of the gaming industry, there are myriad examples of blank-check deals gone bad, but there were benefits for Codere Online in that form of going public.

We raised over $100 million net of fees which allowed to fund a very ambitious marketing plan over the subsequent two years,” noted Guillermo Lancha Jiminez, Codere Online’s head of investor relations. “By being able to invest meaningfully in our markets, we were able to our consolidated revenues by nearly 50% in 2022, our first year post de-SPAC, followed by 40% growth in 2023.”

Codere Online, founded in 2014, is a unit of Codere Group — the only listed Spanish company in the gaming industry. The online operator is the first internet gaming entity from Latin America to publicly trade in the US.

Codere Online Could Be Hidden Gem

Combine its market value of $368.50 million (as of late US trading hours Monday) with the fact that it doesn’t operate in the US and it’s not a stretch to say Codere Online may be overlooked relative to other sports wagering equities.

However, the operator’s focus on Spain and Latin America isn’t a negative. Specific to Latin America, that’s a fast-growing sports betting market and one that some US-based gaming companies are tapping into, indicating Codere could be onto something placing an emphasis on that region. Currently, the bulk of the operator’s Latin America footprint consists of Mexico — the region’s second-largest economy.

Unlike US iGaming and sports betting companies that typically rush to enter every state possible, Codere Online took a pragmatic approach to Latin America by focusing on Mexico, not rushing into other countries simply for the sake adding new markets.

“We put other markets like Argentina, Colombia or Panama, where we currently don’t have a winning formula, on standby while we continued to focus in our core markets,” added Jiminez.

Coder Online Fast to Reach Profitability

One of the primary drags on shares of de-SPACed companies, gaming and otherwise, is that those firms often try investors’ patience by taking awhile to become profitable. That wasn’t the case with Codere as it took the operator just two years to reach profitability, underscoring the benefit of not doing business in the high-priced US market.

Jiminez said the company remains focused rapid growth while not risking its free cash flow and earnings before interest, taxes, depreciation, amortization (EBITDA) positions.

“We have achieved relevant positions in these markets that we plan to defend and as we start to generate cash over the coming months, we will remain attentive to any opportunities that can help us maximize the value for our shareholders,” he concluded.

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