Comment from the EVO call today: "We're also progressing well with the Galaxy acquisition, and we expect to close the transaction during the second half of 2025".
From an IRR perspective it is probably desirable that the deal closes. But secretly I'm kind of curious where it is going to trade in case of a deal break. Would be less profitable (at least in the short run) but more interesting!
Well, closing guidance is 2nd half 2025 now, possibly due to multiple ongoing country/state/tribal reviews. EVO appears to have had some regulatory trouble recently, and there were even some objections raised by unions related to a massive labour dispute in Georgia (the country).
Meanwhile, 1Q'25 revenue declined again, EBITDA was flat, so tough to say where the downside could be.
That said, I'd be wary of extrapolating too much from one or two single quarters. Galaxy has a pretty good long-term track record of increasing revenue, generates most of it revenue from "physical" casinos and also generates a decent chunk of revenue overseas. After a long stretch of growth I think odds are against Galaxy Gaming being a fad.
I wouldn't go as far as a fad either - it's a compelling point that they have some features/games that every casino would want to offer. But it seems to be in a kind of limbo:
- as a merger arb, it's 14% upside/-50%(?) downside, so maybe not particularly compelling, though perhaps more likely to close than the market thinks;
- for a fundamental value investment, the upside is currently capped by the pending deal (DCF valuation was also $2.5-3.5 based on management projections), but would be more attractive if the deal breaks, opposite to the merger arb premise.
The “limbo” is one of the reasons I like it right now. I think you can buy a decent company at a decent price while other investors are waiting for clarity.
Could be. In general I try to be careful with arguments like "it's mispriced because it is illiquid / hated / small / big". In my experience a quantitative approach serves as a better anchor for me.
Nice write up! Fellow shareholder here. I agree that the spread warrants some caution, but GAN traded with quite a spread almost all the way up to the merger close.
Hi @writser thank you for the excellent write up - I enjoy your content! I saw in a twitter dialogue that there might be a company update on the deal status in the next week or so, is that right? Thanks!
Comment from the EVO call today: "We're also progressing well with the Galaxy acquisition, and we expect to close the transaction during the second half of 2025".
From an IRR perspective it is probably desirable that the deal closes. But secretly I'm kind of curious where it is going to trade in case of a deal break. Would be less profitable (at least in the short run) but more interesting!
Well, closing guidance is 2nd half 2025 now, possibly due to multiple ongoing country/state/tribal reviews. EVO appears to have had some regulatory trouble recently, and there were even some objections raised by unions related to a massive labour dispute in Georgia (the country).
Meanwhile, 1Q'25 revenue declined again, EBITDA was flat, so tough to say where the downside could be.
Yeah, that is the bear case.
That said, I'd be wary of extrapolating too much from one or two single quarters. Galaxy has a pretty good long-term track record of increasing revenue, generates most of it revenue from "physical" casinos and also generates a decent chunk of revenue overseas. After a long stretch of growth I think odds are against Galaxy Gaming being a fad.
I wouldn't go as far as a fad either - it's a compelling point that they have some features/games that every casino would want to offer. But it seems to be in a kind of limbo:
- as a merger arb, it's 14% upside/-50%(?) downside, so maybe not particularly compelling, though perhaps more likely to close than the market thinks;
- for a fundamental value investment, the upside is currently capped by the pending deal (DCF valuation was also $2.5-3.5 based on management projections), but would be more attractive if the deal breaks, opposite to the merger arb premise.
The “limbo” is one of the reasons I like it right now. I think you can buy a decent company at a decent price while other investors are waiting for clarity.
I feel like there’s an portion of the spread that can be explained by the stock simply not being large and liquid enough for arbs
Could be. In general I try to be careful with arguments like "it's mispriced because it is illiquid / hated / small / big". In my experience a quantitative approach serves as a better anchor for me.
Sure - hear you. Nonetheless I think it’s valid here. I’ve spoken with spec sits PMs who know about GLXZ but don’t want to spend the time given size.
Nice write up! Fellow shareholder here. I agree that the spread warrants some caution, but GAN traded with quite a spread almost all the way up to the merger close.
https://www.gaming.nv.gov/about-us/agendas-and-dispositions-minutes/ yet another missed month… and only one slot left before Jan’26
Yep, taking longer than expected. Though I wouldn't be surprised to see another extension if a regulatory delay is the (sole) problem.
Bad news don't normally come along, they usually come in pairs
Hi @writser thank you for the excellent write up - I enjoy your content! I saw in a twitter dialogue that there might be a company update on the deal status in the next week or so, is that right? Thanks!
No clue!
When do you think this closes
When do YOU think it closes?
Can't make up my mind. GAN took 18 months, we are at the 14 month mark. I think it closes quicker than 4 months, but just a guess
We'll see. I don't particularly care. If it takes much longer it's probably going to be a deal break - which would be much more fun!
https://ir.galaxygaming.com/sec-filings/all-sec-filings/content/0001193125-25-226974/0001193125-25-226974.pdf