June 28, 2021 – On today’s podcast, we welcome special guests Neal Menashe, CEO of Super Group and Eric Grubman, Chairman of Sports Entertainment Acquisition. Super Group operates global online sports betting and gaming businesses including Betway and Spin. Sports Entertainment Acquisition is merging with Super Group in a deal that values the firm at $4.64 billion.

On the podcast, Neal and Eric discuss:

  • The importance of Super Group’s expansion into the emerging U.S. online sports betting and gaming market
  • Why the sports and gaming industry may offer attractive opportunities for investors
  • Insights into Super Group’s merger with SPAC Sports Entertainment Acquisition
  • Key growth initiatives of the newly-public company
  • How Super Group differentiates itself from competitors including Rush Street and DraftKings
  • And more

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Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.Accelerateshares.com

Julian Klymochko: All right, I’m pleased to announce we have Neal from Supergroup. He’s the CEO, and we have Eric, the chairman of Sports Entertainment Acquisition on the podcast today. They recently announced a business combination, that’s going public transaction, which I’m keen to touch on today. But prior to getting into that, both of you gentlemen have pretty interesting, long careers in business and entrepreneurship, sports, et cetera. So, Neil, I wanted to touch on your background. You’ve been in the online gaming business for over 20 years, started out entrepreneur, co-founding Win Technologies. Can you walk us through that experience and then how it evolved into what Supergroup is today?

Neal Menashe: Okay, so thank you. It’s great to be on your show. For me this has been a journey of over two decades, you know, and probably every single role in the business crossed this time period. And it’s really all being built out of us being able to rebuild what today has now become Supergroup. So, what it means is, it’s all about taking entrepreneurial spirit, entrepreneurial people, and literally going into this online gaming world. And, you know, it has changed over the last two decades. It’s now regulated, it’s in lots of markets across the world, and it’s now become part of what we now understand as the online world, because remember two decades ago, the online world, people didn’t even really know it, right? And especially gaming, yes, you had heard of some of the other companies, Amazon, et cetera, or doing it, but gaming was never front and foremost.

And what’s happened is over these last two decades, we’ve managed with the Supergroup to create this online gaming company. But what we really are is, we are a digital business. We are a digital business that effectively has data in our DNA. So, what is the Supergroup? For me I think, and I always say, when I met Eric and John, it’s a very special company. It’s a special company to all the people who have worked for us. We made up as, we keep telling everyone of two distinct parts. Online, global own, and we do sports betting or gaming or online casino. And we split between Betway, which is our flagship international sports book brand and Spin, which is our multi brand casino offering and really, it’s really simple, our vision, having worked in all the different parts of the business is first class entertainment to the online, worldwide betting and gaming community.

And you might say, why am I keep stressing this word online? Because for us online is key, that is what we are. We don’t have bricks and mortar. We don’t have land-based. Nowhere in world we have land-based, it’s only online. And I think for us, that’s been a unique. And what we also unique about is we’ve got this brand called betway, that is across so many jurisdictions, one brand of sports book, and then we’ve got the multiband casino offering. So, from that point of view, especially with one brand for casino, we are a very unique proposition. We don’t have different brands of different sports books in different regions of the world. It’s one brand, and that’s where we get this global scale, global marketing, global brand sponsorship.

Julian Klymochko: Now, I do want to dig into the business model a bit more of a prior to getting into that. Eric, I did want to touch a bit about your background. You’ve had a wide range and career. Stints in the Navy and then partner at Goldman Sachs, executive VP at the NFL football, now chair at Sports Entertainment Acquisition. So, a wide range of diversity, what appeals to you about the sports and gaming industry?

Eric Grubman: Well, Julian. First of all, thank you for having me on the show and thank you for having Supergroup on the show, great company and great management team. You know, you missed the slot. One step in my career, I’ll be it brief, I was co-president of a large utility holding company called Constellation Energy Group. 

Julian Klymochko: Right. 

Eric Grubman: So, when you string those things together, there’s one common theme and that’s serendipity. Things just happened and something was attractive and interesting, and I went and did it, but when it came to the sports industry. I made a very deliberate decision, judgment, really that I was going to go to the national football league. When the commissioner at the time, Paul Tagliabue, who asked me to join the team. And I did it because every step in my career thus far had been in service like the military or in services that people had to have. Energy, financial services, so forth and so on. And I wanted to be in an environment that was different. I wanted to be in an environment that from the standpoint of how people make decisions and judgements, right, is defined as getting the votes. You have to convince people as opposed to doing it in a different manner, hierarchical environment, but in regard of sports, I want it to be in what I think of as the show love business, the passion business. People are fans, because they want to be fans. People consume sports and entertainment because it’s a core part of their lives that they enjoy. You and I were talking before the podcast about what else we do, and you’re a great snowboarder and you’re into jujitsu, and you’re into things like that. You do that because you choose to do that, and you love it. If you didn’t, you’d get out of those things. And it’s the same sports and entertainment. So, I really enjoyed it, my years at the NFL, and when I decided to start a SPAC, we want it to point at that industry broadly, sports and entertainment. That’s the name of our SPAC, Sports Entertainment Acquisition Corp.

Julian Klymochko: So certainly, a lot of growth and you have the positive macro tailwinds backing the sports and gaming industry. So, appreciate and agree with your thesis. Now, Neal, you did mention the betway, your online sports betting brand and spin. You’re a multi-brand online casino offering. I was wondering if you could walk us through the business model, how you guys generate revenue, how the company generates profits?

Neal Menashe: Okay, so really simple. These businesses already simple. You pay to acquire customers and you keep them in your ecosystem and that’s called your lifetime value. And the difference between the lifetime value and the prospect position is what the business makes. So, what that means is, this is all about customers. This is all about acquiring retention and looking after these customers. So how we do that is, we do that across the world in 23 jurisdictions and growing, and that excludes the U.S. and what it means it’s all about align them, whether they’re a sports customer or they’re an online casino customer, giving them what they want in the product. But remember we open and this is very important to remember, we open 24 hours a day, seven days a week in 26 languages. So, you need scale to deal with us. And also, what you need is you need to scale with people to be able to deal with the country.

So, we consider each country, a market. So, when we say we have 23 jurisdictions, you then got the U.S. as well, each state in the U.S. would be a market for us. So, how you make money? You have money by this global brand called betway, that can have sponsorships and have customers coming into its ecosystem, but you have to keep the customers. You’ve got to look off to them. The software has to work correctly and you have to have this fan engagement, this customer engagement that Eric talks about for sports. Whereas if you get online casinos, they very different. Online casinos need lots of brands. People feel the genres of those individual casinos is what they like. So, you might have to have different fields of casinos to attract those customers. So, we do this on a global scale, and we’ve been doing this for a very long time. And how we make money is, we make money by having managing over three and a half thousand people across the world that effectively live, eat, and breathe these markets and the customer engagement. And for us, that’s what’s made us to be able to do these profits that we do, and the revenues that we do.

Michael Kesslering: When we look at many SPAC targets, they typically, especially U.S. SPAC targets. They typically have a strong U.S. presence, then they are looking to use some of the capital to expand into international markets. How important is Supergroup expansion into the U.S. right now? And can you explain how the Digital Gaming Corporation Acquisition kind of plays into that strategy?

Neal Menashe: Yes, okay. So, as I said, you’ve got this global market and the U.S. is a very important part of it. So Digital Gaming Corporation, Supergroup has recently acquired it, which is subject to regulatory confirmations and standard closing conditions. And they have access to the betway brand and they have access to market access enough to initial 10 states in the U.S. some have or basically already gone live. And what it means is it’s just each of those states is another market for us. So, what we do is we work with them with the expertise across the world to open into all these markets. So, the same way where each of these U.S. states will be a new market. We’ve got countries in Africa, countries in Europe, countries in south America. The whole world, gaming is for the whole world.

And the U.S. is a very important part of that. And by doing this transaction with them, Eric and John, for us, we weren’t looking to do this transaction. A mutual colleague knew Eric and John knew us, and I look it up business. And I said, you guys would be a perfect partner because once you’re going into all these markets, it’s becoming more regulated. And also, the world needs to know us. Before this transaction, the world didn’t know us. They knew a betway, but didn’t really know of who was part of betway. And for us, it’s all part of this global story, global partnership brand sponsorships across the globe. That for us, allow us to literally take on market by market. And the U.S. is exactly into that strategy of market by market and slowly, and I say to everyone, this is very important, this is a marathon, not a sprint. Online game is being here for the last 20 years is going to be here for the next 20, 30, 40 years. It’s not going anywhere, but it’s who can survive the marathon. You can be the first out of the blocks and then not get your returns, or you can do the marathon. And for us, it’s the marathon and it’s the global reach and diversification of our countries and markets.

Michael Kesslering: And when you talk about that global reach and the diversification of your countries and markets, is that really what it came down to when choosing a hold coat type structure for Supergroup?

Neal Menashe: Yes, so yes. Because it was finally putting the businesses together and having all the people working as one into all these regions, because in order to do this global approach, you’ve got to have teams across the globe and we’ve got to work cleverly together. And remember, its two side, as I keep saying, it’s betway, which is sports, which also got online gaming offering in beltway and it’s the casinos, but you in the same markets, but it’s different customers you acquiring. So, for us, it’s been all about working together as one. And then the meeting, Eric and John was just the combination now that we are a global business, we need a global presence. And how are we going to expand even more? Is by coming to the largest market in the world, which is the U.S. and being listed on the New York Stock Exchange and having excellent people as Eric and John, as our partner, Eric and John are joining our board. Eric is going to be our chairman; John Collins is going to be our director. So, I think we’ve got the perfect marriage of this online, business with great people to help us take this business even to the next step one

Julian Klymochko: One [Inaudible 00:12:50] I wanted to expand on. You mentioned that it’s a marathon, not a sprint, and it’s all about survival. You really stress the diversification into different markets. And now you have this expansion into the nascent, rapidly growing, U.S. market and betting is something that’s been around for hundreds, if not thousands of years. So certainly, it as a business model makes a ton of sense. However, it is highly regulated and, you know, online gaming has been around for 20 plus years. I was wondering what are some of the major risks that investors should be cognizant of the business and especially the expansion into the U.S., what should we be concerned about?

Eric Grubman: Well, we’d probably both have things that a risk that have to be managed for the management team, for the board of directors and then of course, for investors. The obvious risks come along with the compliance and the regulatory environment, and the regulatory environment is not one single regulatory environment. There are many around the world and the United States is a very good example of that. There isn’t one in the United States. There are dozens, each state has its own regulatory scheme, and one state can differ from other state. Another is the management of customer information to make it secure. Management of the payment systems in both directions that the customer has a good experience and money flows in the direction from the customer to the company and from the company to the customer. And both of those systems have to be managed very carefully, expertly and to provide good safety for the consumer, whether that consumer is in Jersey or that consumer is somewhere on the subcontinent of Asia.

Julian Klymochko: So, I wanted to get into the recently announced merger, Sports Entertainment Acquisition, and Supergroup going public. Valuing Supergroup at a $4.6 billion enterprise value. So certainly, a sizeable deal here, is one of the few business combinations without a current concurrent pipe, which I find really interesting in the current market environment, because it was also one of the only recent SPAC deals that actually traded up on announcement. The SPAC market has been, you know, somewhat picked on by the media lately. And it hasn’t traded well, most deals get announced and the stock doesn’t really do anything, but (SEAH) Sports Entertainment Acquisition actually traded well, I was wondering if you wanted to walk through some of the deal dynamics with respect to the structure of the transaction?

Eric Grubman: Sure, first of all, as an overarching set of principles or observations I will say. There are good markets and bad markets. 

Julian Klymochko: Yeah.

Eric Grubman: There are times when SPACs are in favor and there are times when SPACs are not in favor. The best you can do is to find a terrific management team and a terrific company with a good business model, something that the investor, the SPAC, the people operating can understand, and then being able to tell the story to a wide variety of investors from the most sophisticated institutional investor that knows the industry to the retail investor that doesn’t know the industry and everything in between. And so, we found a terrific management team with a terrific company that has a good business model that is relatively easy to understand. In America and the capital markets, the trend has been to focus on the United States when it comes to Spectrum’s actions with gaming companies.

But the reality is that the global market is much bigger than the United States. In some of the areas of the world the jurisdictions are much more mature and others, they’re behind the United States. And so, a company like Supergroup with a global footprint and a history and a keen understanding of how to operate in all different kinds of environments is an attractive investment. And so that’s the pitch that we are making to the investment community. And you know, I don’t really think that we should focus, micro focus on the SPAC price. 

Julian Klymochko: Right. 

Eric Grubman: People are voting with their fee, in the stock, out of a stock. Our job, the management team’s job is to run the company in a terrific manner. And our job as the SPAC sponsor is, continue to keep our heads down and tell the story. Get the get the transaction closed and then add value as board members once we’re combined.

Julian Klymochko: So, with respect to the communication of the long-term thesis behind the transaction and backing Supergroup, what is some of the feedback that you have received from your discussions with investors?

Eric Grubman: Well, Neal going to probably laugh at this. He’s heard me say it five or six times already. When we first announced, the common reaction we got was, who? Because Supergroup literally has snuck up on the industry and the investment community as Neil described private for 20 years, and suddenly they’re on the public scene. 

Julian Klymochko: $4.6 billion enterprise value as well. So, it’s not a small company.

Eric Grubman: Big company, very successful, great management team, and people didn’t know who they were. So, it who a common question. And the second was not a question. It was a reaction, 15 minutes in was, wow. Who and wow, then that means that people who really want to dig in and want to do their own work? And I think that’s, what’s been happening since we announced is the institutional and retail investor who want exposure to this industry, but don’t necessarily know Supergroup. They want to do their homework and we encourage it and we think it will show well. Now we do hear, and I from time to time hear from institutional investors. And I certainly see it on social media, from a retail investor, they are hungry for more information, they want us to put out more information. And so, all we can really do is tell people that within the context of the completion of our audit, which is a typical audit, which is coming up and the completion is coming up in July. We will be able to put out more information and more detailed information, and we will be doing that in connection with the regulatory process, with the SEC, and then ultimately the shareholder vote so that people have a ton of information that they want, but we’re not really able to give them until the audit is complete.

Julian Klymochko: Yeah, that makes sense. And investors need to be cognizant of the fact that as you’re going through this process of deal completion, you’re somewhat restricted on what you can say and the information that you can put out to the market. But that being said in your investor presentation, Supergroup is forecasting, a 25% revenue compound annual growth rate. Was wondering what are some of the key growth initiatives that will drive this increase in value, increase in revenue growth?

Neal Menashe: Well, it’s simple. If you take data being part of your DNA and you’ve got the markets you in, so think about it. You’ve got existing markets you in, you’ve got all the customers in those existing markets. You’re opening up new markets. You’ve got the scale team across the world, and it’s about bringing, for example, I’m saying March, we had two and a half million unique customers in our system. Well, if you get two and a half million and you say I had 3 million, what if I had 4 million? What if I had 5 million? It’s just about engaging, acquiring these customers, keep on developing your products, keep on developing the ecosystem and its data. It’s all about, what about these customers want at what moment of their journey in your ecosystem? And then we go deal with business on as return on investment for years and years, and this is no different now. And it’s about different markets will be at different stages of the ecosystem. And that’s why I keep saying this is a marathon, not a sprint. It doesn’t mean because you start off in a market that you have to be the market leader. That’s not that not our thesis, our thesis is, we will be in all these markets across the world, and we will be competitive in all these markets. And all of them will be at a different lifecycle by the very nature of when you open them and also about your product and about how we take this data and use it to the ability to become profitable in these regions, and we make profits. So, we’re not a business that doesn’t make profit. And I know one of the questions you had asked before about why we don’t have a pipe, as an example. Well Supergroup bringing 300 million, minimum of 300 million to this deal, plus you got perspective, got 450 million, we don’t need more money yet. 

Julian Klymochko: Right.

Neal Menashe: You know, we make new money, we are highly profitable. We’re not a business that is burning through so much money that unless I’ve got $500 million in the bank, I can’t survive for the next six months or a year. That’s not who we are. We are profitable, but yes, different markets will be at different life cycles in that. And, so for us, we didn’t need the pipe. 

Julian Klymochko: Yeah, that makes sense with respect to the cash.

Eric Grubman: Julian, can I just jump in and highlight something Neal said, which I think is incredibly simple and insightful at the same time. This is a stake I want to pound home for investors. And it was one of a handful of really distinguishing factors that jumped out to me and John Collins in the very first discussion that we had with Neal and Richard Hasson who is not on this call, but you hear companies talk about, or investors ask companies, what market share do you need? And that language is not Supergroup language. Supergroup language is around, are they comfortable in a regulatory environment? In a particular jurisdiction? Do they have the expertise? Do they believe that they can acquire customers? And then the number of customers globally is what drives the company and how the management team thinks about success.

So, they have opportunity sets all over the world and they have investment capital that they can apply to this opportunity set. So, when they look at the incremental Neal talk about, two and a half million customers as of March as a data point, if Neal wants a hundred thousand more customers and he has capital to apply, he’s not pinned to a market share projection that he’s made to some analysts or some group of investors. He could apply that capital where he’s going to get the hundred thousand customers. The best chance to get the a hundred thousand or in 10 different places to get 10,000 each. And that is a very different way of thinking than market share per state or market share country. It is the number of global users and how to maximize the effectiveness of capital and marketing and human resources to make those numbers go up.

Julian Klymochko: Now in terms of competing for those customers, obviously there are some large competitors out there in the market, in the betting and gaming space. I wanted to touch on how you guys differentiate yourselves from competitors, specifically high growth, higher profile names, such as DraftKings and Rush Street and companies such as that.

Neal Menashe: So firstly, DraftKings, Rush Street, et cetera, or just U.S. focused. 

Julian Klymochko: Right. 

Neal Menashe: As I said, in the beginning, U.S. is one part and each state is an individual market. We are continents, we are in the continent of Africa, we in lots of countries there. In Europe with DGC, Betway. Coming to America, isn’t America just starting, right? In South America, we do it differently. So, for example, we have global sponsorship partnerships. We’ll do it with the NBA, the Chicago Bulls, the Brooklyn Nets. We do the NHL and I tell people we would have done these led deals, these partnership deals without even having a business in America. And they said, well, how can you do that? I say, because the NBA is the second most bet on sport we have. As an example, football, take football. Soccer is not only about the Premiership in the UK or the Spanish LaLiga. Not because it’s only for people living in Spain or living in England, it is broadcast, across the globe.

So, we have this brand that we spin and can amortize out sponsorship. So, we’ve got this global sponsorship, but then we can localize target and that’s the difference. And then you’ve got other competitive [Inaudible 00:27:24] who’ll be made up of five big sports books in the sports betting brands in what I called the Coliseum or asset of brands that they’ve got, but we’ve got one breath. So, we open in more markets and that’s the key. And the key is then taking, being super focused on the product in each of these markets, because little nuances of the product then can make a huge difference in return and I think that’s why that’s market share is not such an issue for us. It’s more about this global reach and increasing this database of customers to enjoy the service in a safe and secure environment that we give our customers.

Julian Klymochko: Right, and prior to wrapping things up today, I did want to ask one last question. Since you guys are the pros, the experts on betting and gaming, what’s the best sports bet out there. Do you have any sort of tips, perhaps NHL playoffs, Tyson Fury, Deontay Wilder, a boxing match coming up, where should our listeners be taking a look at? Which bets do you like?

Eric Grubman: Well, I’ll give you my own view, personal and professional. To the extent that somebody wants to engage in sports betting. I think that the best bet is something that they’re really interested in, entertained by and are passionate about. There’s an old saying, probably goes back a thousand years that sports betting was invented about 10 seconds after sports. And I go back to why this is interesting to us. It’s entertainment, at its core it’s entertainment and people should have fun and be entertained and enjoy it. So, the best bet is something you’re going to enjoy. And it’s going to add to your passion and enthusiasm, that’s my 2 cents.

Neal Menashe: And there’s so many sports across the globe. So again, there’s so many sports events going on now, between the NBA, the NHL playoffs, you’ve got the Euro football, you’ve got cricket, you’ve got tennis, you’ve got table tennis, we got e-sports, you know, this is an offering across multiple sports. 

Julian Klymochko: So, you’ve got something for everyone it seems. Well Neal, Eric, I’d like to thank you for coming on The Absolute Return podcast today, a really insightful discussion for investors wanting to perhaps follow the stock. Currently trades under SEAH, and when the merger closes, I believe the new symbol will be SGHC. You expect it to close in the back half of 2021. So, I wish you guys a much success in the future and look forward to how seeing things unfold with the company.

Neal Menashe: Thank you. Thanks so much for having us, really appreciate it. 

Eric Grubman: Thank you very much Julian.

Julian Klymochko: All right, perfect. Thanks gents. Bye everybody.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.