Should You Buy Esports Technologies (EBET) Stock After the IPO?

Esports Technologies stock rose 507 percent on the first day of trading. What can investors expect after the EBET IPO? Is it a good buy?

On April 15, Esports Technologies (EBET) had a successful debut on the stock market. On its first day of trading on the Nasdaq, EBET stock surged 507 percent. The company plans to raise $14.4 million in the offering with a valuation of about $80 million. Is EBET IPO stock a good buy for investors in 2021? What can investors expect after the IPO?

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Esports Technologies is an online gaming platform. The Las Vegas-based company is focused on esports and competitive gaming. The company operates gogawi.com, which is a platform for bettors located in Latin America and Asia. Esports Technologies also accepts wagers and enables users to place bets on professional sports, including the NBA and NFL.

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Esports Technologies (EBET) IPO date

Esports Technologies is offering 2.4 million shares in the IPO at $6 per share. The company has upsized its offering to match investors' growing appetite for technology companies. Initially, the company planned to offer 2 million shares for $4.50–$5. The IPO is set to close on April 19—subject to the customary closing conditions. 

The proceeds from the offering will be used for product and technology development, working capital, and general corporate purposes. Boustead Securities was the sole underwriter for the offering.

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EBET’s stock price

On April 15, Esports Technologies stock started trading on the Nasdaq under the ticker symbol "EBET." The stock opened at $21, up 250 percent from its IPO price. EBET stock closed 507 percent higher that day at $36.42. The stock is up over 40 percent in the pre-market trading session on April 16. 

Esports Technologies isn’t profitable, but has been in the past.

Esports Technologies has been profitable in the past, although it isn’t profitable right now. The company reported a net loss of $573,255 for the fiscal year ended September 30, 2020, compared to a net income of $24,103 in the period the previous year. Esports nearly quadrupled its selling, general, and administrative expenses. As of December 2020, the company had $1.2 million in total liabilities and $2.6 million in cash. 

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EBET’s IPO valuation

In the fiscal year ended September 30, 2020, EBET’s revenue rose by 38.9 percent YoY to $195,778. The IPO terms put the company’s fiscal 2020 price-to-sales multiple at 408.6x, which looks expensive compared to competitors' multiples. DraftKings (DKNG) and Rush Street Interactive (RSI) have NTM EV-to-sales multiples of 20.6x and 1.0x, respectively.

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Esports Technologies stock forecast and Reddit discussion

The outlook for Esports Technologies stock looks promising. This is mainly because esports betting has a significant market opportunity. Esports account for a projected $1.8 billion of the $443 billion global gaming market size. Reddit investors hope that the company will be able to capitalize on an accelerating trend. I think that in the near term, EBET stock will fall after the initial listing euphoria dies down.

Is Esports Technologies IPO stock a good buy?

Esports Technologies IPO doesn’t look like a good buy because of high valuations and increased operating losses. Also, the company’s revenues declined by 70.9 percent YoY to $10,794 in the quarter ended December 31, 2020.

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