Sportradar has said a “low- to mid-single digit” portion of its revenue is exposed to “grey markets”, as the supplier was at pains to stress it does not work with black market bookmakers.
Speaking on the company’s Q1 earnings call on Tuesday, 28 April, management fielded questions from analysts regarding the damaging reports published by two short sellers, Muddy Waters and Callisto Research, which sent Sportradar’s shares tumbling by 20%.
The documents accused Sportradar of partnering with illegal operators and benefitting from black markets. The stock is down a further 14% to $11.95, at the time of writing.
CEO Carsten Koerl and CFO Craig Felenstein said the exposure to grey markets was around 5%.
Felenstein added that the “primary exposure” would come from Sportradar’s managed trading services (MTS) arm.
The CFO explained MTS, which is the supplier’s full-service sportsbook platform, accounts for around 45% of overall revenue.
Although, when stripping out the US and major operator partners in regulated jurisdictions, along with public estimates on grey market sizing, the “math takes you back down to that low- to mid-single digit exposure”, Felenstein said.
Koerl added: “We do not work with black market operators. For the grey market, we have solid compliance structures in place, and we only work with licensed operators. We take this very, very seriously and we are running a very rigid KYC process.”
The New York-listed firm has also filed a 6-K (a mandatory reporting form used by foreign private issuers to provide the SEC with material information made public in their home country) in which it laid out three scenarios Sportradar could be connected to a third party.
Those include direct, licensed B2C customers, such as DraftKings, FanDuel, Superbet and evoke.
The second bucket is “licensed B2B-to-B2B distribution” wherein aggregators that hold a direct relationship with Sportradar will redistribute data to other parties.
The final example given was of pirated or unauthorised feeds.
One of the accusations in the short seller reports is the presence of the Sportradar source code on unlicensed operator sites.
Sportradar said source code identification can not distinguish between the three scenarios.
The 6-K read: “As a result, Sportradar’s risk disclosures with the SEC have emphasised that it has revenue indirectly derived from jurisdictions where we, or clients, are not required to hold a licence or where limited regulatory framework exists, and the approach to regulation is subject to uncertainties.”
Other allegations laid out by Muddy Waters in its report allege Sportradar sales staff at ICE were willing to accommodate individuals purporting to be sportsbook execs looking to enter illegal markets.
Muddy Waters claimed a sales rep had explained how to support expansion into the likes of Thailand and Vietnam, where online sports betting is illegal.
On this allegation, Koerl said: “This was far off from signing a contract, and this was a sting campaign on a relatively young sales employee at ICE. No excuse on this, it shouldn’t happen, but this was far off from signing a contract.”
When asked by Barry Jonas of Truist if any of Sportradar’s league partners or gaming regulators had been in touch since the reports’ publication, Koerl said he had received a “lot of support”.
Sportradar holds data rights deals with major sports leagues, including the NFL and MLB.
The post Sportradar shares plunge again as bosses point to small “grey market” exposure first appeared on EGR Intel.
Management says a “low- to mid-single digit” percentage of the affected revenue primarily attributed to managed trading services arm
The post Sportradar shares plunge again as bosses point to small “grey market” exposure first appeared on EGR Intel.