The stock of Bragg Gaming (NASDAQ: BRAG) experienced a surge in value following an announcement from investor Jeremy Raper, founder of Raper Capital. Raper urged the gaming company to explore strategic alternatives, including the possibility of a sale. The letter, addressed to Bragg CEO and Chairman Matevz Mazij, emphasized Bragg’s underperformance since it debuted on the Nasdaq in August 2021.
Raper expressed his dissatisfaction with the company’s valuation in the public market. Despite its relatively strong growth, Bragg’s stock struggled to achieve fair value. As a result, Raper suggested that a sale could bring a “gargantuan premium” and provide certainty of value for investors.
In response to Raper’s push for a sale, Bragg management acknowledged that the stock had failed to gain adequate valuation in public markets. While a strategic review was announced in 2021, the company didn’t previously mention the possibility of a sale. However, Raper believes that a third-party sale is the best course of action to realize proper returns for the value created by the company’s management.
Raper’s assertion is supported by the recent trend of consolidation in the iGaming and sports betting sector, particularly on the technology front. He highlighted that since August 2022, there have been at least seven acquisitions of iGaming companies, which occurred at an average enterprise value to earnings before interest, taxes, depreciation, and amortization ratio of 15x. In contrast, Bragg trades at just 5.5x EV/EBITDA, indicating significant undervaluation.
Furthermore, Raper emphasized Bragg’s well-above market rates of growth and its unique and durable content, suggesting that there would be ample interest from potential buyers. Despite the uncertainty of whether a buyer would pay the estimated value, Raper sees “irrefutable economic logic” for Bragg to pursue a sale.
The announcement of a potential sale has sparked investor interest, causing the stock to rise significantly. The proposal for Bragg Gaming to explore a sale as a strategic alternative has generated significant attention within the investment community.