Jason Ader: US sports betting bubble could burst like bitcoin
Independent sponsor to “ring the alarm bell” as he warns too many people are trading online gambling stock
The 2020 explosion in US sports betting investment could follow a similar trajectory to the dramatic rise and fall of bitcoin, according to investment sponsor Jason Ader.
Speaking exclusively to EGR, Ader likened the flurry of cash being thrown at sports betting businesses in the States to the US stock market prior to the 1929 Wall Street crash.
“There’s too much speculation right now in this market, too many people are telling me that their relatives are trading stocks like DraftKings and buying and selling shares in online gaming,” said Ader. “That’s not good, because it means there are too many people involved,” he explained.
“It’s similar to the stock market crash in 1929, the people on Wall Street who predicted it were worried about the fact that the waiters and people in the service businesses were all investing in stocks at the very top.
“This happened in bitcoin just a few years ago prior to the crash and unfortunately it’s happening in online gambling and sports betting right now, so I would ring the alarm bell here and say that you have to tread very carefully,” he added.
Spring Owl Asset Management CEO Jason Ader
The Spring Owl Asset management CEO highlighted this week’s appointment of basketball legend Michael Jordan as a special adviser to the board of directors at DraftKings.
The celebrity hire boosted the operator’s share price by more than 16%, representing the total market capitalisation of US market rival William Hill.
“That’s not a normal environment, that’s impossible and it’s going to end very badly,” said Ader. “It’s a bit scary. There’s a lot of reasons for DraftKings and it’s similar to Tesla and a few other trends that we’re seeing in the US market in terms of excessive speculation,” he explained.
DraftKings’ share price has more than doubled since the company went public in April, despite the company registering a $161.4m net revenue loss for Q2 2020.
The company now has a market capitalisation of $14.2bn following its float, a figure Ader insists is unsustainable in the long term.
In addition, the Playtech investor suggested the rapid rise in online gambling stock prices after the Covid-19 downturn has created a bubble of investment which could ultimately burst.
“The business potential is very exciting but the stock price valuations are way ahead of the reality right now and that is down to too many people buying the stock,” said Ader.
“A gold rush is a good way to describe it. Everyone who’s entered is losing money and it’s going to be years before the businesses actually turn profitable,” he concluded.