On Wednesday, Elys Game Technology (NASDAQ: ELYS) announced that it would be acquiring Bookmaker Company US (USB) for $12 million in cash and equity.
The $12 million is the upfront price, and Elys could ultimately pay up to $53.8 million for the company, depending on the various earning clauses. USB will receive an additional $38 million-plus a potential 10 percent based upon achievement of certain earnings before interest, taxes, depreciation, and amortization in the next four years.
The acquisition of USB is in line with Elys’ plans to secure the fast-growing US sports betting market. USB is a Las Vegas-based company founded in 2016 to provide consulting and sportsbook services to gaming companies. USB also offers brick and mortar sportsbook design, develops mobile sports wagering apps, and provides in-game betting services.
USB has been providing services to Santa Ana Star Casino in Albuquerque, New Mexico after the Supreme Court rules in favor of the Professional and Amateur Sports Protection Act (PAPSA). The firm has also expanded to Colorado, Michigan, and North Dakota.
On Wednesday, Elys’ stock jumped by four percent after the news of the deal emerged. Elys shares have declined by more than three percent in its year to date, plummeting down to 32 percent.
However, analysts believe that Elys shares are inefficiently priced and could represent a value for prospective investors. The company’s cash flow is positive at $21.5 million. Compared to its market capitalization of $89.1 million, that is quite an impressive sum.
However, analyst Debra Fiakas cautions investors to expect results in the first two quarters.
“Early investors could be incentivized by a compellingly priced stock relative to market opportunity. Nonetheless, a long position in ELYS will require patience, as the business model, even though proven in the Italian market, will still need time to play out in the US.”