If you picked up some shares in FansUnite Entertainment Inc. (FANS: CSE; FUNFF: OTCQB) after reading our Oct. 6 article—“FansUnite Poised to Become a Winning Investment in the Online Gambling Sector”—then you probably know by now that you made a winning bet that is currently paying out at about a four-to-one ratio. Shares were trading at about C$0.23 then and fell off to as low as C$0.19 during the succeeding four weeks. But on Nov. 6 shares started making a noticeable climb higher, with ever-increasing trading volumes and sharper surges to the upside that saw a new all-time high of C$1.07 and recent price hovering in the low C$0.80s.
Little doubt that our Oct. 6th headline can be considered prescient. Indeed those sentiments expressed in that earlier article still hold true and we will recap them again here for those less familiar with FANS. But first, let’s examine what drove the recent share price action to establish that it’s not a case of loaded dice, but instead based on identifiable stock share maneuvers and mechanics that occurred as the company continued to successfully execute its business strategy.
A Confluence of Short Sellers and Institutional Buying
Following the release of our Oct. 6th article, the share price action in FANS remained rather muted. However, during the latter half of October and into early November more investors apparently became aware that some early issued, locked-up shares were going to be released for trading. In response to this dilution of the available float, some investors started selling their shares, while at the same time short sellers began increasing their stake against the share price. A stake that grew by more than seven-fold, from 139,605 shares short on Oct. 21, to almost one million short by Nov. 6.
While the company issued two news releases of note during this period, subsequent share price and trading volume increases were rather lackadaisical—at least when compared to the significant share price surge and sustained trading volume increases that ensued following a Nov. 16th press release. On that morning FANS was “pleased to announce” that it was uplisting from the U.S. Over the Counter (OTC) “Pink Sheets” to the OTCQB Venture Market. As noted by FANS CEO Scott Burton in the release, “by upgrading our ticker, we will have increased visibility and exposure to a broader investment community.”
He wasn’t kidding, as evidenced by the almost 2.5 million shares traded on the U.S. market alone (about 1.4 million traded that day on the Canadian index). This uplisting opened up trading to institutions which are not allowed to trade in OTC Pink Sheet shares, and they are definitely interested. Prior to the uplisting, trading volumes north of one million were rare on both the U.S. and Canadian indexes and volumes averaging from 100,000 to 200,000 were more the norm. Since the uplisting, daily trading volumes on the U.S. exchange have ranged from about 1.4 million to 5.5 million, and other than one day of declines, all represent daily trading upticks.
Behold the power of institutional buying! This is what it looks like when institutional money takes initial positions in a microcap company. It is also extremely validating for FansUnite’s investment thesis to see vast amounts of smart money pour in on the very first days it became accessible.
The short sellers, meanwhile, have been in retreat. As of the latest short selling report released on Nov. 20, short interest was at 287,521, a 697,319 short share decline from the 984,840 short shares listed on the Nov. 6th report. Perhaps needless to say, but the holders of the remaining short shares are sitting on some significant percentage losses. With the dramatic price rise in FANS, some of these short sellers may be tempted to double or triple down, and new short sellers will undoubtedly enter the game. Given recent positive news from the company, as well as expectations for more yet to come, we believe the short sellers could be playing some long odds.
Recent News Supports Share Price Increase
While the market uplisting is primarily responsible for pushing FANS’ share price surge, recent news certainly warrants—and supports—share price appreciation, too. Consider first the company’s Nov. 5th news that its wholly owned subsidiary McBookie recorded the highest increase in year-over-year monthly revenue and gross margin in the company’s 10-year history. And we’re not talking about doubling or even tripling, but instead an October 2020 433% revenue increase and 713% gross margin increase over figures recorded in October 2019. Adding further impetus to the positive nature of the news, the company is attributing much of the increase to new live casino betting products and a significant uptick in online betting, spurred in part by new betting features.
On Oct. 22nd the company announced that it had signed a deal with a European online casino aggregator to offer its Askott Games proprietary random number generated (RNG) games to online casinos and sportsbooks in the European market. Under the deal, Askott RNG games will be made available to over 120 online casino and sportsbook websites, with a share of net gaming revenue going to FANS every time one of their RNG games are played. And the number of Askott games available on the 120 partner websites will undoubtedly increase within a year, further boosting this potential revenue stream. The games are specifically designed to target the 18-30-year-old market and any success in attracting this highly desired demographic would undoubtedly lead to more deals.
Expectant investors will be on the lookout for FANS to expand their gaming license holdings and aggregator partnerships to increase their addressable market for generating even more revenue. No doubt that as FANS proves out their RNG games and eSports betting technology that platforms like DraftKings, Penn Gaming and others around the world which have large user bases in the 18-30 year old demographic will take an interest in getting these higher margin options onto their platforms.
Last, on Nov. 25th the company announced that it had joined the Canadian Gaming Association. While the news doesn’t come with any promise of near-term revenues, it opens up new networking opportunities in online gaming and ensures that FANS holds a position on its home turf as the online casino and sportsbook market evolves in Canada. This latter fact could be quite important as the Canadian government may open online gambling operations to non-governmental entities, a move under which Canadian-based companies would likely be favored first.
FANS Continues to Successfully Execute on its Business Strategy
The past month has certainly been exciting for FansUnite’s investors and company management is seemingly just getting started. The recent news and price action shows that the small company is garnering large interest from institutional investors as they move quickly to enhance and increase their B2B offerings and work to strategically and creatively get them into the hands of larger companies. By working out a deal with the European online casino aggregator, FANS is quickly putting its proprietary games to work. Not only will this lead to new revenue streams but provides more exposure to the company’s line of games. This exposure could prove especially game changing should FANS deliver on its goal of capturing the market of the elusive 18-30-year-old gaming demographic. We assume that FANS will ink similar deals in the months to come, further enhancing its revenue stream and building its cachet as an innovative partner for online gambling businesses.
The outstanding, record-setting revenue and gross margin increases made by FANS’ subsidiary McBookie show that the company is executing on the B2C front, too. Driven in large part by new features, the financial news showcases the effectiveness of the company’s B2C online casino and sports betting platform. Little doubt that FANS will continue to enhance the platform and demonstrate their ability to immediately and dramatically add value to any virtual casino.
Overall, FANS is showing the world that it can deliver with both its B2B and B2C products and services and starting to establish itself as an up-and-comer in the online gambling space. And the company’s timing couldn’t be better, given the opening of North American markets to sports betting, evolution of online gambling access, and the distinct increase in all forms of online gambling, including eSports betting, which FANS plans to have a big role in, too.
Resources to Learn More
In our most recent article covering FansUnite we lay out 5 Extremely Compelling Reasons to invest in the software and technology company.
Prior, in our initial coverage of FANS we heard from Board of Directors member and online gaming researcher Chris Grove of Eilers & Krejcik Gaming as he pointed out that “Smaller companies can solve problems for bigger companies, problems that bigger companies don’t have the time or talent to solve themselves.” A revisit to this article would no doubt be illuminating.
No coverage of FansUnite would complete without a demonstration of their technologies. Video demonstrations are in each of the two articles linked above but for the real experience you can demo the RNG games yourself at Askott.Games and the eSports stream betting at Demo.AskottEntertainment.com.
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FansUnite November 2020 Investor Deck:
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