Newspaper The Australian interviewed Tom about the success of Waterhouse VC’s investment in BetMakers, a core holding of his eponymous fund. Tom reiterates his focus on B2B opportunities, which are well-positioned to take advantage of the continued growth of US online sports wagering.
TOM WATERHOUSE HITS THE JACKPOT WITH PUNT ON GAMBLING SHARES
By John Stensholt , September 6, 2021
Bookmaker turned fledging funds manager Tom Waterhouse has made an eye-opening return of more than 1800 per cent in two years buying gambling shares for investors, as the boom in the US wagering market has sent global betting stocks skyrocketing.
Much of the big return is from a canny deal struck with ASX-listed BetMakers, on which his Waterhouse VC wholesale gambling investment fund is more than $30m ahead since July.
BetMakers, which lobbed an audacious bid in May for Tabcorp’s wagering business as part of a proposed $4bn deal, has been one of the best performers on the ASX in the past 18 months thanks to its exposure to the US, where its business-to-business (B2B) model includes offering fixed odds and back-office services to wagering firms and regulators.
“We really like BetMakers and that B2B space is exactly what we are concentrating on,” said Mr Waterhouse.
“It is about the suppliers to the industry. The odds aggregators, fixed odds providers and things like that.
“It probably gets used too much – calling it the picks and shoves strategy (of investing in a technology to produce something rather than the product itself) – but that is what it is.”
Mr Waterhouse’s fund recently emerged as the sixth biggest BetMakers shareholder with a 3.67 per cent stake in a company that now has a market capitalisation of more than $1bn.
Based on Friday’s trading price, it gives the Waterhouse fund a stake of about $38m. But it only paid $6.2m for the shareholding thanks to a deal struck with BetMakers in January last year.
Then, BetMakers management clinched deals to provide data and technology to a new tomwaterhouse.com betting aggregator app and an odds trading operations outsourcing service in a joint venture. BetMakers reportedly has made more than $6m revenue from the deal already, which has seen performance rights for Waterhouse vest and convert into share options that he exercised at 18c per share in July. BetMakers shares closed at $1.23 on Friday.
It has been a big reason for the Waterhouse VC fund, which is open to investors who now put in a minimum $1m and almost completely focuses on wagering stocks. It has returning 1802 per cent since its August 2019 inception and 489 per cent in 12 months.
A 2 per cent management fee is calculated monthly and a performance fee of 20 per cent is charged on an individual basis based on the unit price an investor enters at.
Mr Waterhouse took up investing after a chequered bookmaking career that saw him emerge as the face of the betting industry and hated for it. He had an ill-fated stint as boss of William Hill in Australia which included the chopping of his own tomwaterhouse.com brand.
He managed to get the brand back two years ago and has since run a bet tipping service and the odds aggregator app, but Mr Waterhouse said he was spending most of his time studying gambling stocks and now had at least $75m under management.
“We’ve probably looked at about 80 stocks … and typically we like to operate in that $100m to $300m (market cap) space, where maybe there’s not as many analysts covering stocks and there’s opportunities.”
Some are larger companies, such as the London-listed Flutter Entertainment that owns the digital giant Sportsbet in Australia. Flutter shares are up about 25 per cent in a year.
Other positions include Aspire Global, a Stockholm-listed provider of online casino platforms and services. Aspire shares have more than doubled in 12 months.
Waterhouse VC also has a stake in Australian private firm PlayUp, which attracted notoriety in a former life that included Malcolm Turnbull as a shareholder and a collapse before new management and owners converted it to a betting and racing platform that is growing quickly in the US in particular.
US states are quickly opening up and allowing online betting for the first time after decades of it being banned outside casinos, resulting in a stampede into the market. Australian firms such as Pointsbet and BetMakers have become market darlings, while many European giants are piling into the sports-mad marketplace.
“We’ve been lucky in that way, with the US opening up,” Mr Waterhouse said. “It is a one oncein- a-lifetime opportunity where the biggest consumer market is opening up like this. It really is just the beginning there.”
Mr Waterhouse said he was aware he would need to manage investor expectations.
“If you have a poor year, then you have to have that conviction that you are in it for the longterm and it is about communicating that to your investors.
“This industry is at our core and we’re not going to go outside that.”