2023 has been a challenging year for gaming equities, including those that went public via reverse mergers with special purpose acquisition companies (SPACs). However, Codere Online Luxembourg (NASDAQ: CDRO) has managed to distinguish itself. The Spanish sportsbook operator, which launched on NASDAQ on December 1, 2021, following a merger with blank-check firm DD3 Acquisition Corp. II, has seen its stock soar by 170% year-to-date. This impressive performance places it ahead of other US-listed gaming stocks originating from SPAC deals, such as DraftKings (NASDAQ: DKNG), Rush Street Interactive (NYSE: RSI), and Super Group (NYSE: SGHC).
Examples of blank-check deals failing to meet expectations abound both within and outside the gaming industry, but Codere Online benefited significantly from this method of going public. “We raised over $100 million net of fees, which allowed us to fund a very ambitious marketing plan over the subsequent two years,” remarked Guillermo Lancha Jiminez, Codere Online’s head of investor relations. “By being able to invest meaningfully in our markets, we increased our consolidated revenues by nearly 50% in 2022, our first year post de-SPAC, followed by 40% growth in 2023.”
Founded in 2014, Codere Online is a subsidiary of Codere Group and is notable as the only listed Spanish company in the gaming industry. Moreover, it is the first internet gaming entity from Latin America to publicly trade in the US. With a market value of $368.50 million as of late US trading hours Monday and no operations in the US, Codere Online might appear overlooked in contrast to other sports wagering equities.
Focusing on Spain and Latin America has proven advantageous for Codere Online. Latin America, particularly, is a rapidly expanding sports betting market, and several US-based gaming companies are also venturing into this region. Codere’s primary focus in Latin America is Mexico, the region’s second-largest economy. Unlike US-based iGaming and sports betting companies that often hastily enter multiple states, Codere Online adopted a measured approach in Latin America by honing in on Mexico and not prematurely expanding into other countries just to add new markets. “We put other markets like Argentina, Colombia, or Panama, where we currently don’t have a winning formula, on standby while we continued to focus on our core markets,” added Jiminez.
One common issue with de-SPACed companies, gaming or otherwise, is their delayed profitability, which can be frustrating for investors. Codere Online defied this trend, achieving profitability within just two years, underscoring the advantages of avoiding the costly US market. Jiminez emphasized that the company remains dedicated to rapid growth without jeopardizing its free cash flow and earnings before interest, taxes, depreciation, and amortization (EBITDA). “We have achieved relevant positions in these markets that we plan to defend and as we start to generate cash over the coming months, we will remain attentive to any opportunities that can help us maximize the value for our shareholders,” he concluded.
