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TICKERS: FANS; FUNFF

The Future of Online Entertainment: eSports and iGaming Profits Have Major Upside
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Peter Krauth With iGaming and eSports participation numbers exploding, Peter Krauth profiles small-cap FansUnite Entertainment that is well positioned to benefit.

Online iGaming, eSports and viewer participation rates within these sectors is exploding.

In fact, that was the case even before Covid-induced lockdowns forced people inside, racking up more screen time than ever.

With restaurants, bars and cinemas shuttered, our smart TVs and laptops quickly became our best friends. With traditional sports on hiatus, sports enthusiasts sought out alternatives, many discovering eSports and online gaming entertainment.

"The really big news is FansUnite's brand-new U.S.-based partnership with a pioneer in skill-based iGaming products. That marks a timely expansion into the huge gaming market of the U.S."

According to Statista, nearly $50 billion gets placed with online games globally each year. Despite this, the industry is experiencing phenomenal growth, with that number expected to approach $100 billion by 2024.

And given how current pandemic restrictions will continue to severely limit interpersonal contact and travel for some time yet, odds are high iGaming and eSports will soon have to revise those growth forecasts even higher.

As the industry expands, entertainment companies providing the software, platforms and market access will grow exponentially.

In the midst of all this, one small-cap pioneer is growing through mergers, acquisitions and organically to become a powerhouse in this space.

Just one of its recently acquired assets generated $1 million in revenue last year. It's on track for $2 million this year, with zero marketing, and there's now a $500,000 marketing budget which could double or triple revenues. What's more, margins should increase by 25% thanks to new synergies.

But the really big news is its brand-new U.S.-based partnership with a pioneer in skill-based iGaming products. And that marks a timely expansion into the huge gaming market of the U.S.

The Rise of eSports and iGaming

In case you're less familiar, eSports is a type of sport competition through video games. Typically, tournaments are organized where multiple pro players compete either alone or as teams. Live events draw ever bigger numbers.

That's meant sports arenas filled with thousands of fans watching real competitions. As a result of the pandemic, many such events have already moved seamlessly online.

It's an explosive industry with millions of fans, big prize money and billions in sponsorship and endorsements.

If you have any doubts about the industry's credibility and draw, consider this: the NBA and basketball legends like Michael Jordan have established partnerships and endorsements in eSports.

ESPN has gotten into the game as well, with a history of live programming and coverage of eSports.

So companies that know how to serve the industry by leveraging their software, infrastructure, networks and intellectual capital stand to perform handsomely.

A Standout iGaming Pioneer

That's why investors should take note of FansUnite Entertainment Inc. (FANS:CSE; FUNFF:OTCMKTS). Aptly led by its President Darius Eghdami, the company recently acquired Askott Entertainment Inc., forming one of North America's leading online entertainment and gaming companies.

The company has been active in gaming for the past six years. Today, its new combined management team boasts vast experience across capital markets, transactions, sportsbook management, online gaming networks, payments, affiliates, systems infrastructure and data management, and government relationships. All the bases are covered.

"The partnership with GameCo accelerates our plans and growth by at least a year and a few million dollars, and opens the door for FansUnite to showcase its technology in the burgeoning U.S. market," Eghdami said. It aligns us with companies that have navigated licensing in so many jurisdictions and puts us in a great position to execute on our vision of providing industry leading technology globally."

Technical analyst Clive Maund wrote on CliveMaund.com on September 8, "The fundamental outlook for the company remains favorable with its gaining access to the important U.S. market. . .We therefore stay long and it is rated a strong buy here."

FansUnite is an online entertainment and eSports company, which operates the FansUnite Sportsbook and the McBookie website, offering online gaming to the UK market. As well, the company provides technology solutions, products and services to the global gaming and entertainment industries. Their goal is to acquire technology platforms and assets offering high-growth potential in new or developing markets.

Askott Games develops exclusive gaming options with eSports and video game themes. While available to partners on the Chameleon platform, these games are also being licensed to external aggregators, accessing hundreds of online gaming sites and sportsbooks.

The company's been moving at warp speed, with its latest move likely to help vault it into the big leagues. FansUnite subsidiary Askott Entertainment has just signed a partnership agreement with Las Vegas-based GameCo LLC, a pioneer in skill-based iGaming products. This key step introduces Askott's iGaming platform, Chameleon, to the U.S. regulated market.

"With this newly launched partnership, we are able to showcase our turn-key white label iGaming solution while officially launching our technology into the burgeoning U.S. gaming market," said Scott Burton, CEO of FansUnite Entertainment. "We are aware of the sizable market that the U.S. presents, and understand that eSports is a key component to any traditional sportsbooks future offering. This partnership with GameCo is a significant inflection point for FansUnite and accelerates our plans to enter the U.S. market by at least 6-12 months."

GameCo, a pioneer with the world's first machine allowing video-gamers the test their abilities and win cash, has gaming licenses in nearly 30 jurisdictions, including New Jersey and Nevada, in the U.S. This enables GameCo to become an official reseller of Askott's Chameleon iGaming platform in the U.S., one of the most desirable and active gaming markets worldwide.

FansUnite Sportsbook is a B2C platform available for licensing to operators. Clients pay an on-boarding fee for B2B, and FansUnite gets a share of revenues on sportsbooks, offering fiat, crypto or blockchain options.

Acquired in March during the depths of the coronavirus pandemic, McBookie is a Scotland-based sportsbook operator that hasn't disappointed. With over 10 years of organic growth serving the UK market and over 80,000 members, McBookie has had over $100 million of gaming volume over the past three years.

Its year-over-year gross gaming revenues for Q2 were up an astounding 131%. A new virtual sports offering in March was well timed and, combined with higher casino activity, compensated for the decline in traditional sports. However, the return of the English Premier League has grown sportsbook turnover in June by 45% YoY.

Commenting on these stellar results, Eghdami said, "Perhaps the most pleasing aspect of the figures was the way the sportsbook bounced back in June. McBookie is now in a very good position to deliver strong growth once the full complement of sports return in the fall."

But even if that doesn't happen, the growth of eSports and iGaming are likely help to fill that void, and then some.

FansUnite has had Askott in its sights for some time, and with good reason. Since its first eSports daily fantasy site in 2014, Askott has developed a full suite of eSports-first iGaming products. Partners can use their white label Chameleon Gaming Platform or opt for a custom solution.

The strategic acquisition of Askott by FansUnite was an astute, prescient move. Combined, they create one of North America's leading online gaming companies. Here are some highlights:

  • Expanded Consumer Base. The newly amalgamated company has four business-to-consumer (B2C) platforms, having generated CA$350 million in gaming to date, with over 300,000 registered members;

  • Expanded Business Base. The combined companies have four business-to-business (B2B) contracts, of which two are live and generate revenue with eSports companies;

  • Expanded Offerings. This year two eSports themed casino games will be released on multiple casino games aggregators' platforms, with more in development;

  • Increased Gaming Licenses. Both B2C and B2B gaming license applications have been completed;

  • Established Operating History. Askott has been operating since 2013, working with tier 1 partners globally;

  • Highly Accomplished and Experienced Team. The newly combined leadershipteam is unparalleled, with decades of experience in all aspects of the industry to grow shareholder value.

"As the online gaming market continues to grow, the amalgamation with Askott is a significant milestone and transforms us into one of Canada's premier iGaming companies," said Eghdami. "Combining with Askott provides us with a fully integrated gaming asset that offers multiple B2C platforms for users in a variety of offerings, B2B technology that can be licensed to all types of sportsbooks, and a seasoned team of executives that have led and grown multiple organizations on a global scale. This combination creates a leading online iGaming company, and positions us strongly for significant growth with new offerings and market opportunities."

Under the New FansUnite Hood

The newer and better FansUnite boasts a lean share structure, with 156 million shares outstanding, 8.5 million warrants with an average exercise price of $0.49, and 7.7 million options whose average exercise price is $0.38.

That means a respectable market cap just shy of CDN $45 million. But it's sure to prove dramatically undervalued looking forward, which hasn't escaped the eyes of some of the savviest institutional investors.

These include the likes of Shaked Ventures, Rhino Ventures, Pathfinder and Konvoy Ventures, who all own a stake.

Here's what Jackson Vaughan, managing partner at Konvoy, saw in Askott back in April 2019, "We invested in Askott because they provide a core technology infrastructure for the adoption of iGaming in eSports. More than just a clear belief in the technology and growing opportunity of speculation in eSports and video gaming, we were incredibly impressed with Scott Burton and Jeremy Hutchins as operators and business builders."

Commenting on FansUnite in a recent Streetwise Reports article, Knox Henderson said, "As part of FansUnite's roll-up strategy of entering into other world markets, acquiring yet maintaining well-established brands is the key to building its global B2B customers and B2C end users. The company is well funded with access to capital. Much of its support comes from industry leaders on the board like Shafin Diamond, CEO of Victory Square since 2015, a venture builder that builds start-ups in web, mobile, gaming, AI and AR/VR. Diamond has launched 40 start-ups in 24 countries, employed more than 350 people, and has generated over $100 million in annual revenues. He has received numerous awards, including the BC Tech Person of the Year Award, BC Angel Investor of the Year in 2014, and Business in Vancouver's Top 40 under 40."

As the newly combined FansUnite Entertainment moves forward through the Covid reality and beyond, the company is better equipped than ever to capitalize on opportunities. Its suite of B2B and B2C offerings cover the gamut.

Askott has a recently inked an agreement with The Ear Platform to integrate its Casino Aggregator hub on to Askott's Chameleon Gaming Platform. This will serve as an additional revenue stream, as the B2B Chameleon Platform, through The Ear's Aggregator hub, will offer partners access to over 6,000 casino games by way of a single integration. In addition, the Chameleon Gaming Platform was just shortlisted for EGR Esports Provider of the Year Award.

The Right People and Tech, Plus a Soaring Industry

Thanks to its 12%–18% revenue-sharing business model in eSports, iGaming and now 6,0000 casino games, Chameleon alone has the potential to vault FansUnite Entertainment into a billion-dollar company.

McBookie generated $1 million in revenue last year. It's on track for $2 million this year, with zero marketing. FANS now plans to spend $500,000 on McBookie marketing, which it estimates could double or triple revenues. And margins should increase by 25% as the asset switches over to its internal technology.

In addition, other assets like VAMOSGG, which most recently launched on the Chameleon eSports platform, will help drive revenue growth. VAMOSGG is a Latin America focused brand, showcasing the platform's flexibility to launch highly localized sites. Chameleon currently supports 10 languages, with the ability to tailor to additional languages as needed.

Finding a sector that's not just holding its own, but thriving through this challenging economic environment, is difficult enough. Add in that eSports viewership totaled 454 million in 2019 and is expected to jump 50% to 646 million by 2023, according to Business Insider Intelligence estimates, and you have a perfect storm.

FANS' executive team and board of directors have stated an express focus on continuing to acquire strong iGaming assets.

Solid access to financing in place, FANS' Eghdami sees major opportunities in the U.S., saying, "The big heavyweights are coming into the U.S. We don't intend to be an operator in the U.S., so we're looking at other ways to get in the market and that includes social peer activity, fan engagement, as well as licensed affiliate opportunities…We have a great opportunity to use our stock as currency, and then grow and scale companies through our team and resources."

The company's world-class technology nominated for eSports platform supplier of the year, highly experienced management and board teams, and rich B2B margins have yet to be priced in by the market. That leaves FansUnite dramatically undervalued relative to billion-dollar peers like Draftkings Inc. (DKNG:NASDAQ), GAN Penn National Gaming, Inc. (PENN:NASDAQ) and Flutter Entertainment plc (FLTR.L:LSE).

Investors now have the opportunity to share in the huge growth of a premier North American eSports and iGaming pioneer. At this juncture, that's likely to be tremendously rewarding.

In my view, FansUnite Entertainment Inc. (FUNFF:OTC; FANS:CSE) should bring in $3 million to $5 million in revenues next year, and is likely to double its market cap over the next 12 months from $45 million to $120 million. That should make for some very happy shareholders.

Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market, with special expertise in energy, metals and mining stocks. He has been editor of a widely circulated resource newsletter, and contributed numerous articles to Kitco.com, BNN Bloomberg and the Financial Post. Krauth holds a Master of Business Administration from McGill University and is headquartered in resource-rich Canada.

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Disclosure:
1) Peter Krauth: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: FansUnite. My company has a financial relationship with the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with FansUnite. Please click here for more information. An affiliate of Streetwise Reports is conducting a digital media marketing campaign for this article on behalf of FansUnite. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of FansUnite, a company mentioned in this article.

Additional disclosures:

CliveMaund.com
Clive Maund does not own shares of FansUnite, and neither he nor his company has a financial relationship with the company.




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