Raper Capital's Jeremy Raper expounds on his letter to Bragg Gaming $BRAG
Dec 5, 2023
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Jeremy Raper, founder of Raper Capital, discusses his letter to Bragg Gaming urging them to sell the company. They also explore potential buyers for Bragg Gaming, the financial benefits of acquisition, and the trial between Spirit and JetBlue.
Jeremy Raper urges Bragg Gaming board to sell the business due to reliance on one major customer and undervaluation compared to industry standards.
Antitrust trial regarding Spirit and JetBlue merger reveals weak government argument and the unpredictability of trial outcomes in the market.
Sega Sammy's acquisition of Ganon positions them in the online gambling market, displaying strategic growth potential.
Deep dives
Podcast Summary: Bragg Gaming
The podcast episode discusses Bragg Gaming, a B2B provider of gambling software and content to the iGaming industry. The host interviews an expert, Jeremy, who has written a letter to the company's board urging them to sell the business. Jeremy highlights that the current CEO is the principal shareholder and argues that given the structural risks of relying on one major customer, the business should be sold to maximize value for shareholders. Potential buyers mentioned include Playtech and other land-based casinos looking to enter the online gaming market. Jeremy emphasizes that the current valuation of Bragg is significantly below comparable transactions in the industry, making a sale a logical move.
Podcast Summary: Antitrust Trial on Spirit and JetBlue Merger
The podcast episode covers the antitrust trial regarding the proposed merger between Spirit and JetBlue. The host and guest discuss the government's weak argument against the merger, which is based on the idea that even minimal harm to a customer in an isolated market justifies blocking the merger. They highlight the lack of evidence presented by the government to support their claims and point out that the government overlooks the potential benefits of the merger, such as increased connections and better service. The guest also references the Twitter versus Elon Musk case to illustrate that the market's prediction of the outcome of such trials is not always accurate.
Podcast Summary: Spectrum Brands vs. Government Antitrust Case
The podcast episode mentions a past antitrust case involving Spectrum Brands, where the government argued against a merger based on theories of harm. However, Spectrum Brands proposed a divestiture that would address the government's concerns, and the judge questioned why the divestiture was not being given more consideration. The discussion highlights the government's weak argumentation, lack of proof of harm, and the importance of proposed remedies in antitrust cases.
Strategic Acquisition of Ganon by Sega Sammy
Sega Sammy, a $5 billion Japanese content player, made a surprising move by acquiring Ganon, a highly distressed company with no online gambling business. This acquisition, which came at a high premium, is seen as a strategic move for Sega Sammy to enter the online eye-gaming market, which they had previously expressed interest in. Although there are risks involved, such as the deal closing timeframe and Ganon's financial situation, this acquisition positions Sega Sammy for potential growth in the online gambling industry.
Concerns Over Bragg's Convertible Issuance
Bragg, a company discussed in the podcast, faced criticism for issuing convertible debt in 2022. The terms of the converts were seen as unfavorable, with a discounted conversion rate and the potential for significant dilution. The company's decision to issue converts instead of pursuing other financing options raised questions about their capital management and cost of capital. Despite the concerns, Bragg's business execution has been commendable, with strong revenue and EBITDA growth, but their capital allocation strategy and understanding of the market have been questioned.
Jeremy Raper, Founder of Raper Capital, is back on Yet Another Value Podcast to discuss Bragg Gaming (NASDAQ: BRAG / TSX: BRAG), a global B2B content-driven iGaming technology provider. On November 22, 2023, Jeremy published "An Open Letter to the Chair of the Board of Bragg Gaming Group." on his website (link below), where he outlines strategic alternatives for the company. Jeremy and Andrew close out with Jeremy's take on the Spirit / JetBlue trial.
[1:55] Jeremy's Letter to the Board of Bragg Gaming $BRAG; company/thesis background and why Jeremy wrote and sent the letter
[17:20] Who is the right buyer for $BRAG?
[24:51] $BRAG financing in September 2022
[31:14] $BRAG CEO and management performance
[37:55] $BRAG final thoughts
[38:35] Jeremy's take on Spirit / JetBlue trial
[44:13] How Spirit / JetBlue trial compares to Twitter / Elon case
[47:23] Spirit / JetBlue bear case
[50:10] How Spirit / JetBlue case affects Hawaiian Airlines and Alaskan Airlines merger
[54:11] Final thoughts
Today's episode is sponsored by: Alphasense
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