00:00 Spokesman a
Sports book operators under pressure as Illinois introduces an increase in bets on bets. Legislators are crossing the budget, which includes a 25 -cents per bet on the first 20 million online sports betting. The tax rate is then increased to 50 cents per bet. For more information, what this means about sports betting, let’s get to the Civil Studies Analyzer, this will be Jordan Bender. Jordan, it’s always great to see you in the show. So, these names were under some pressure today, Jordan. I see that DraftKings decreased by about 6%, Flutter finished nearly 3%. If I am an investor, Jordan, I have a capital engaged in these two names. How worried should I be? What will mean for their bottom lines?
01:46 Jordan Bender
Hey Josh, I’m glad to see you as always. You know, we left Friday to work and we don’t really expect something that comes on the weekend. And less than 24 hours later, DraftKings and Flutter, they hit with quite a big increase in Illinois taxes. You know, the reaction today from investors and you can see it in the shares, and the shares here, it’s just really outside the blue. This was not expected. And this is a bit of the terrible part that we have observed an increase in taxes as part of this industry. And this is expected and everything is done with an equal tax. Just as the flat tax appears. This was done more on a completed tax base. And this is the second consecutive year that has caught investors on the lust. Hmm, you know, the terrible problem here is the vision line behind some of the tax increases are starting to become shorter and shorter. Illinois, it happened in less than 24 hours. It wasn’t a radar. Um, these companies will have to work through how to adjust business models. But, you know, we are in the upper form of both names. We are a scourge in the industry. We think there are ways to actually compensate for some of these tax impacts that we think will be about 80 million a year to prepare Knustings and Flutter will be about 85 million a year on an annual basis.
04:23 Spokesman a
These ways to compensate it, Jordan, those levers you think they could pull, translate us through it.
04:48 Jordan Bender
So, historically, what we saw is to take the cost of the cost structure. You up to sales and marketing decrease. Some of the technological costs may fall. I think this time around, given that this is Illinois, this is the second consecutive year it has happened. The effective tax rate is now over 50%. And these companies come to the point where you know, Illinois P&L or even New York P&L, they no longer make that much money, just given how high taxes are. So, there are ways to compensate on the surface. Um, you make people bet more, you make people bet more parliaments or longer parliaments. And the last interesting point here, which I had today, have a lot of discussions with investors is, you know, we see this as the Uber and Lyft ride applications, where they will actually show you the actual fee or impact for any riding on your receipt. Um, you know, investors have thrown this idea today so you know that they are subject to your bet, Illinois, they apply 25 cents for each bet. And then beyond that, there are actually a 50 -step step up. But just showing the end user, this is what the state has done. Hmm, you know, the messages so far and yesterday from DraftKings and some of these sports betting operators is that they are hot this time to just pass it on to the user, not necessarily take the blow themselves. So, a little change in the tone this time above the historical tax rate is increasing. But you know, we somehow talked about the rough impact on the draft and the flicker. We do not think that you will go anywhere close to this and I think the user will take a lot of the weight here from it.