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  "documentTitle": "Genius Sports Limited (GENI)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Ben Axler",
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  "sourceTypeLabel": "Short seller",
  "presentationDate": "2021-08-05 00:00:00",
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      "kind": "callout",
      "text": "We believe Genius Sports, an overhyped revenue growth story assumed to benefit from the broader sports betting market, is facing competitive pressure and is unlikely to achieve its stated 25%+ growth targets",
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      "text": "Despite lower revenue growth by competitors in 2020, Genius reported revenue growth of 30% for 2020\nWe believe this growth is likely a result of a one-time benefit driven by the new Premier League partnership",
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      "text": "Our research shows a significant disconnect between management's guidance and reality\n$60bn Total Addressable Market includes pre-match betting (we estimate ~30%) where it is hard to charge revenue share as there is no value in exclusive data\nWe believe revenue shares are typically in the range of 1.5%-2%, for tier 1 exclusive deals\nGrowing competitive pressures from sports leagues and sportsbooks will likely pressure margins",
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      "text": "Genius purchased the NFL rights for ~$120 million per year including equity\nBased on our research, Genius likely overpaid for the rights as competitor Sportradar did not find the price economical",
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      "text": "We believe Genius Sports, an overhyped revenue growth story assumed to benefit from the broader sports betting market, is facing competitive pressure and is unlikely to achieve its stated 25%+ growth targets",
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      "text": "Disintermediation Risk: a customer told us they plan to directly approach sports leagues to \"break the model\" and eliminate the middleman\n\"This is definitely a possibility. Another guy and I within the company have already been tasked to go direct, to approach the actual source of the data and see if we can do direct deals.\" \"You can get more from us and our competitors and we can pay less because there is no middleman to be paid...\" \"Its all doable, its not even near impossible.\"",
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      "text": "Genius' competitive advantage and main driver of 2020 revenue growth is its exclusive Premier League rights which are expensive at a cost of ~$14m/yr\nGenius is facing an anti-competitive lawsuit from Sportradar relating to The Premier League contract, a risk to Genius' major source of revenue",
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      "text": "downside: 60% - 80%",
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      "kind": "paragraph",
      "text": "Genius Sports (\"GENI\" or \"the Company\"), a provider of live sports data from its partnerships with sports leagues to sportsbook customers, has recently gone public through an acquisition by DMY Technology Group (DMYD), a special purpose acquisition company (SPAC). While the market's current view of Genius reflects the growth of the sports betting industry, in reality, our view is that Genius is just another intermediary that provides similar data to its competitors and will likely fail to capitalize on the wider industry growth. Spruce Point has conducted an in-depth analysis of Genius including speaking with various industry experts and analyzing partner contracts. A sports data providers' competitive advantage is its key exclusive rights (NFL & Premier League for Genius), which Genius is paying considerable fees for. In the case of the NFL rights, a Sportradar executive explains that Sportradar was unable to justify the price Genius is paying the NFL. We find exclusive rights are only valuable for live/in-game betting and less so for the majority of wagers placed on the final result of matches. Genius' bull thesis revolves around a stated 5% revenue share rate of gross gaming revenue (GGR). Our research shows this figure is more than double the current market rate and typically only applies for exclusive data rights. We have significant concerns regarding the Company's \"noncash\" revenues, a result of contra/barter deals with sports league partners where services are provided \"at no cost\" in return for rights to league data, that may result in inflated revenue and may lead to future financial reporting issues. In addition, we believe investors may be misguided by potential \"fake news\" around growth opportunities, including betting revenue from NCAA events where Genius does not own the betting rights. We believe Genius' shares have significant long-term downside to our price target range of $3.25 - $6.50 per share, a discount below the $10 acquisition price where its previous private equity sponsor sold shares in its IPO. In the near term, we believe there could be up to 55m shares of GENI that could be sold. We estimate 35m insider shares become unlocked next week after a 60-day period following the June 9th equity offering, 11.2m NFL warrants are exercisable through next week, and 9.2m public warrants can be exercised on August 18th.",
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      "text": "“This is definitely a possibility. Another guy and I within the company have been tasked to go direct, to approach the actual source of the data and see if we can do direct deals.” “You can get more from us and our competitors and we can pay less because there is no middleman to be paid...” “Its all doable, its not even near impossible.” — Anonymous customer",
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      "kind": "title",
      "text": "55 Million Reasons To Sell In The Near-Term; 60% - 80% Downside To $3.25-$6.50 Per Share",
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      "evidence": "The deck starts by identifying the problem with Genius Sports, highlighting its poor risk/reward investment thesis.",
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