Bragg Gaming (NASDAQ: BRAG) announced the establishment of a special committee on Tuesday to explore strategic alternatives, potentially including a sale.
The committee, composed of board members and led by Director Don Robertson, comes amid a 44.5% rise in the small-cap gaming stock over the past year. Bragg, headquartered in Canada, previously initiated a strategic review in 2021, which did not explicitly mention a sale and did not garner significant attention.
According to a statement from Bragg, the special committee has been tasked with considering various strategic alternatives, such as a sale of the company or its assets, a merger, financing, further acquisitions, or other options.
Raper had previously suggested that a sale by Bragg could provide investors with greater certainty of value, especially given the stock’s relatively low multiples compared to industry peers. While Raper praised Bragg’s strong fourth-quarter and 2023 results, he has not yet commented on the committee’s formation.
The timing of Bragg’s announcement may be opportune, as analysts anticipate increased consolidation in the iGaming and sports betting sectors, particularly focusing on technology. This suggests that Bragg could attract interest from various potential buyers.
Bragg stated that it will not offer further commentary on the status of the strategic review process for the time being but will provide updates as necessary in compliance with applicable securities laws. Despite ongoing strategic reviews, the company remains committed to executing its strategy with the support of the Board.
Recent acquisitions in the business-to-business (B2B) and business-to-consumer (B2C) iGaming space indicate potential for significant value in a sale for Bragg.
Transactions in this sector have occurred at an average enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio of 15x, more than double Bragg’s current trading levels.
Last year, Raper suggested that if Bragg traded at a 12x EV/EBITDA multiple, the shares could be valued at $13.50. As of the latest data, the stock was priced at $5.30.
