Sports Stock Index Posts April Gains Amid League, Betting Tumult

Brendan Coffey
·4 min read

The JohnWallStreet Sports Stock Index rebounded in April to finish up nearly 3%, a modest gain even as many component stocks experienced wild swings in the month.

The benchmark sports index closed the month at 1,682.90, up about 45 points from March, with 26 of the 40 component stocks posting gains in April. The Sportico index lagged the broad market for the second consecutive month—the S&P 500 index rallied 5.6% in April. Still, sports stocks are up 18.6% in 2021, handily beating the S&P’s 11.3% year-to-date advance.

Manchester United generated the biggest headlines given the announcement of the Super League, of which it would have been a permanent member, free from the threat of relegation and open to gathering billions of dollars in global media rights. Shares spiked 11% on the news but quickly surrendered all of the gains, as the Super League fell apart. It then advanced once more to close out last week strongly on investor hopes the turmoil would lead to governance reforms at the team. The Glazer family controls about 75% of the equity of the squad and market chatter suggests the upheaval might cause the family to sell or reduce its stake, which would be a positive. That’s because funds and other institutional investors often won’t hold stocks of businesses where one entity owns more than half the equity or voting control. As Sunday’s fan protest which canceled United’s tilt against Liverpool shows, the Glazers are also viewed poorly by a segment of Man U’s fan base.

Formula One advanced more than 8% in the month as it announced a 10-year agreement to add Miami to the F1 circuit starting next year. The grand prix race, with a date to be determined, will be the 11th F1 circuit in the U.S. and take place around the stadium of the Miami Dolphins. Other live event stocks in the JohnWallStreet index also posted solid gains in April, led by Live Nation and Madison Square Garden Entertainment, each gaining more than 10%.

The expansion of sports betting in North America continues to be a major theme with investors, too. Maryland and Arizona legislatures approved sports betting mid-month, while Canada’s senate moved along a bill to legalize sports gambling in that country. The biggest JohnWallStreet gainer was Scientific Games, a company that provides betting technology to bookies as well as software for running casino games. The Las Vegas-based company surged 52% in the month, lifted in part by its announcement that betting customers in the U.K. processed more than 50 million wagers on its software during the Grand National horse races mid-month. Joining in the double-digit gains were Genius Sports, which added 43% in April, buoyed by the closing of its going-public transaction with a SPAC, since many institutional investors wait until mergers are completed before accumulating shares. Caesars Entertainment climbed 12% as it completed its acquisition of William Hill, which gives the combined company 18 sports betting jurisdictions in the U.S., as well as in the U.K., William Hill’s major market.

Still, the positive news didn’t prevent some sports index companies from suffering steep losses in April. Penn National Gaming, owner of casinos and a large minority of Barstool Sports, surrendered 16% in the month, even as Wall Street analysts trotted out a series of buy ratings on the stock. There are some signs of weakness for Penn, as the company lost market share in Michigan early this year. Penn and DraftKings lost more than two percentage points’ share each in the state, according to an analysis by Credit Suisse, falling further behind MGM and FanDuel, which are the largest betting operators in Michigan. Both Penn and DraftKings shares declined 8% in April. Slumping worse was Score Media and Gaming, a Toronto publisher that has pivoted strongly to sports betting and recently moved its stock market listing to the NYSE. Shares lost 37% in April even as it reported its first quarter handle grew 491% from 2020.

The JohnWallStreet Sports Index is a 40-stock index meant to reflect the state of professional sports. The index was launched at a level of 1,000 starting Aug. 1, 2020, as an equal-weighted benchmark, meaning each component begins as 2.5% of the index’s value. The index undergoes quarterly rebalancing to weight component stocks equally.

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