DMY Technology Group, Inc. (NYSE:DMYD) is a special purpose acquisition company (SPAC) that forms blank check companies and merges them with existing businesses to reorganize their corporate structure. It targets specifically gambling companies.
While it’s on a buying streak, is DMY Technology Group stock a Buy?
The business model is simple and straightforward, but if you’re not a business guru it can seem complicated. CEO and Director Niccolo de Masi and Chairman Harry You are consumer technology experts and industry veterans.
By integrating their business model into companies, they aim to optimize them for maximum profitability. Of course, that’s easier said than done – the investors who own these companies can be rigid, and corporate takeovers are a chess match of business strategies. Plus corporate restructures, aka laying off staff, is often required.
Can DMY Technology Group cash the checks it writes?
DMY Technology Brings Private Companies Public
The company raises money through stock offerings to reorganizes companies through mergers and relaunches them.
It operates as a blank check holding company and created two IPOs in 2020 and has one in 2021. In February 2020, it launched DMYT, which is being merged with Rush Street Interactive. This online casino and sports betting company is now listed on the New York Stock Exchange under the RSI ticker.
Then it launched the IPO for DMYD in August, which merged with Genius Sports in a $1.5 billion deal to create the GENI stock listing in 2021. This creates the leading sports data and broadcaster for bookmakers and a powerful force in the betting industry.
DMY is in the right place at the right time – the U.S. Supreme Court’s 2018 ruling to allow states the right to decide on online gambling changed the federal landscape. More and more states allow it in all its forms, and that means this app company could clean up over the next decade with impressive growth.
Of course, its business model means you need to jump in these IPOs early if you believe in their growth potential. And that has bullish analysts wondering if DMY stock is a Buy?
Is DMY Technology Stock A Buy?
Depending on which stock you want to invest in, you will have different outcomes. There are dMY Technology Group (DMYT), dMY Technology Group II (DMYD), and dMY Technology Group III (DMYIU) to choose from in 2021.
Each is a different company running the same fundamentals and inevitably owned through some stake by the initial company. They’re formed with the purpose of merging into another company.
This means you must perform due diligence on each. DMYD started 2021 at a market capitalization around $550 million. It just completed a $1.5 billion merger though.
It’s no penny stock company either – both DMY and Genius Sports have existing partnerships and revenue streams to make for a successful business. They’re setting these companies up to succeed, not fail, and they’re in a growing online gaming business.
Be sure you understand exactly which company you’re invested in before putting your money down. In most cases, you’re not directly invested in DMY, but you are still investing with DMY.
And that still has plenty of risk.
What Is The Risk Of Buying Into A SPAC?
The hard part about blank check companies (SPACs) like this is it takes time to know whether their model truly can fix or enhance their target companies. Investors who have skin in the game will often see big jumps in share pricing both up and down. It’s not an investment for those with weak stomachs.
You’re investing in different companies each time. DMY is the owner but doesn’t remain the operator. It simply stays on to ensure it protects its own interests.
In most cases, aligning your interests with the company ultimately means you benefit the same way they do. Except it doesn’t always, and you could end up shortchanged if the company ends up bankrupt.
While it markets itself as an app holding company, they’re more specifically gambling apps. This is a Las Vegas-based company entrenched in gambling technology, and that’s a different ballgame than Nintendo.
Regulations are loosening, but political and societal sentiment often shifts on vice industries like gaming. And let’s not forget about the competition.
DMY Technology Group Has Better Funded Rivals
There’s plenty of competition in online gambling, and this company’s family of apps needs to compete with kings. Specifically, DraftKings (DKNG) is growing alongside it with interests in both sports betting and casinos. But that’s not all.
And Flutter Entertainment (PDYPY) owns valuable competitors like Pokerstars, FanDuel, and a majority stake in Barstool Sports. Each of these brands is a Coke to DMY’s Pepsi, and they’re built as conglomerates that can openly feed into each other.
There’s a chance DMY is building these app companies into billion-dollar buyouts for one of the larger multi-billion-dollar gambling companies.
Whether this is good or bad for investors remains to be seen.
Is DMY Stock A Buy? The Bottom Line
DMY Technology Group is a holding company that acquires businesses and assets, spruces them up, then flips them to the public market. It retains controlling interests in the businesses, which operate independently of each other. It’s a great concept happening in a competitive and growing market – online gambling.
The online gaming industry is growing, and everyone from tech upstarts to legacy brick-and-mortar casinos want in on the game. DMY Technology partnered with leading companies throughout the gaming supply chain, but it remains to be seen if it can create notable long-term investor returns.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.