Shares of Bragg Gaming witnessed a dramatic surge on Wednesday following pressure from an investor encouraging the company to explore strategic alternatives, potentially even a sale. The performance of Bragg Gaming’s stock had been floundering for over two years on the Nasdaq exchange. An impassioned letter from Jeremy Raper, founder of Raper Capital and manager of a 375,000-share portfolio in the gaming group, was dispatched to Bragg’s CEO and Chairman, Matevz Mazij. Raper articulated his concerns by declaring the company to be a “chronic” underachiever since its highly anticipated debut on the Nasdaq in August 2021.
Raper’s frustration was clearly outlined in his correspondence with Mazij, where he pointed out that despite adequate time for the public markets to dissect and appraise Bragg’s growth narrative, the stock has stalled, failing to achieve what shareholders might deem as a minimal fair valuation.
Bragg is renowned for offering online casino and sportsbook technology through its ORYX Gaming brand. Despite enjoying a sizeable 44.55% increase in its shares since the start of the year, trading levels linger at a modest $5.55, significantly lower than the 2021 peak that hovered around $25. The latest developments saw Bragg’s stock skyrocket by 21% in late trading on Wednesday, with a volume surpassing the daily average by more than thirteenfold.
Management at Bragg has long acknowledged the stock’s underperformance in the public’s eye, particularly when juxtaposed against peers that command markedly higher valuations. A 2021 statement from the company addressing a strategic review conceded the stock’s challenged performance, despite Bragg’s continued robust growth trajectory.
While a potential sale was not explicitly mentioned in past announcements, Raper’s intervention articulated the belief that such a move could command a “gargantuan premium” and offer investors a much-needed “certainty of value.”
Raper strongly challenged the firm to leverage a third-party acquisition which he insisted was the sole viable strategy to yield an appropriate return, commensurate with the business value constructed by Bragg’s management team. Raper conjectured that his stance would garner resounding support from minority shareholders, vocalizing the sentiment that selling the company was the most practical course of action remaining.
The buoyant investor also posited that Bragg would attract significant interest, a notion that holds water given industry analysts’ predictions of increased consolidation within the iGaming and sports betting sectors, particularly where technology is concerned.
Analyzing recent trends, since August 2022, a flurry of at least seven business-to-business (B2B) or business-to-consumer (B2C) iGaming company acquisitions have been executed at an attractive average enterprise value—even as Bragg stands at just 5.5 times EV/EBITDA. By Raper’s calculations, even at a 12 times multiple, Bragg’s valuation could ascend to $13.50 per share, more than doubling the current price. Whether a buyer would agree to such a valuation is uncertain, yet the economic rationale for a sale appears evident to Raper.
Beyond the numbers, Bragg has shown a propensity for growth that markedly exceeds market rates, primarily through organic channels. Additionally, they possess proprietary content that, in Raper’s opinion, would be highly coveted by major B2C operators or other B2B providers in the market, possibly enough to spark an outright acquisition.
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