australian article today - Waterhouse

Formerbookmaker turned gambling industry investor Tom Waterhouse has lent stock thatcould be being used to short BetMakers – a gaming technology business that hehas a long-term commercial arrangement with.

MrWaterhouse has emerged as one of the biggest shareholders in BetMakers in thepast year, receiving performance rights that have vested into share optionsthat he has then converted to equity as a result of a commercial deal struck in2020.

Documentslodged with the ASX show the Waterhouse VC fund – a wholesale gamblinginvestment fund launched by Mr Waterhouse that holds his BetMaker shares –recently lent some of his stock to Macquarie.

BetMakersis currently one of the most shorted stocks on the ASX in proportional terms,with more than 12 per cent of its shares said to be in the hands of shorters.

Someat BetMakers believe it is the investment bank that is behind the short sellingof its shares.

Otherstocks in which investors hold big short positions include travel agency FlightCentre, e-commerce business Kogan.com and sports betting firm Pointsbet.

Thearrangement is not illegal, nor is The Australian suggesting any wrongdoing byMr Waterhouse or Macquarie. He could not be contacted on Thursday.

Butthe deal does mean Mr Waterhouse could benefit if the BetMakers share pricedrops, with the shares he received at below market prices from BetMakers inreturn for the ASX-listed firm supplying another arm of the Waterhouse businessempire with back office technology.

BetMakershares have fallen more than 20 per cent this year, though rose 10 per cent intrading on Thursday to close at 66c.

BetMakershares are down about 31 per cent in 12 months.

Tom Waterhouse recently lent stock to Macquarie.Picture: Bloomberg

BetMakersmanagement struck a deal two years ago to provide data and technology to atomwaterhouse.com betting aggregator app and an odds trading operationsoutsourcing service in a joint venture. BetMakers made more than $8m revenuefrom the deal in the six months to December, and $6m in the previous half ofthe 2021 calendar year.

Therevenue saw about 34 million performance rights for Mr Waterhouse vest andconvert into share options that he first exercised at 18c per share in July

MrWaterhouse exercised options over another 45.9 million BetMakers shares inJanuary also at 18c per share. In January, BetMakers said it expected theremaining 14.3 million rights issued to Waterhouse VC to vest during thecurrent six month period to June 30 based on the commercial performance of itstechnology services arrangement with tomwaterhouse.com.

MrWaterhouse has made his BetMakers shares a major focus on his Waterhouse VCinvestment fund, which claims to have returned 53 per cent in the past 12months by investing in gambling focused stocks in Australia and severalcountries overseas.

Tom Waterhouse has said he focuses on investing inbusinesses that provide services to the gambling sector. Picture: Getty Images

Ina note to clients earlier this week, Waterhouse VC said it has achieved a totalreturn of 2091 per cent since inception in August 2019. Mr Waterhouse haspreviously told The Australian that his fund has put a particular focus oninvesting in businesses that provide services to the gambling sector.

“We’veprobably 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 analystscovering stocks and there’s opportunities,” he said last year.

Someof his holdings are big companies such as Flutter Entertainment, theLondon-listed owner of the Sportsbet brand in Australia. Other positionsinclude Aspire Global, a Stockholm-listed provider of online casino platformsand services, and PlayUp that holds betting and iGaming licences in the US.

Ithas proven to be a lucrative strategy for Mr Waterhouse and his investors. A 2per cent management fee for his fund is calculated monthly and a performancefee of 20 per cent is charged based on the unit price an investor enters at.

MrWaterhouse took up investing after a chequered bookmaking career that saw himemerge as the controversial face of the betting industry.

Macquariedeclined to comment when contacted.