Genius Sports Stock Plummets, Shareholders Unimpressed with Legend Deal

Genius Sports just set out to acquire Legend, a global, digital sports and gaming media network built to monetize attention, in a groundbreaking $1.2 billion deal. While the company was thrilled about this move, investors did not reflect the same enthusiasm.

Investors Don’t Believe the Acquisition Was a Genius Move

Genius Sports just announced that it had entered into a definitive agreement to acquire Legend, saying that this M&A deal will significantly strengthen its business. However, it seems that investors were not entirely certain whether this was the right move.

Considering the sizeable sum Genius Sports set out to pay in a time when big acquisitions of affiliate companies have had mixed results, it is not that surprising that some investors were concerned. Legend, which is effectively an affiliate business, was not explicitly referred to as such in the deal, perhaps sparking further suspicion among stockholders.

In addition to that, some investors seem largely skeptical of what affiliates have to offer in an age where artificial-intelligence-powered tools seem to be everywhere. And, to top it all off, Genius said that the deal will be largely financed through a loan.

As a result, Genius Sports’ share price plummeted from $8.5 to as low as $6.04. The price has since somewhat improved, reaching $6.26 as of the time of this writing. This reflects the sale of a large number of shares and is not only a clear indication of investor distrust, but also one of the most negative reactions to such an announcement recently.

Not All Is Gloom and Doom, Analysts Say

While investors certainly aren’t pleased, Truist analysts were willing to give Genius Sports the benefit of the doubt. In fact, the analysis firm reiterated a “buy” rating for Genius Sports, expressing some confidence in the acquisition of Legend.

Truist experts emphasized that describing Legend as an affiliate might be an understatement that doesn’t properly reflect the company’s position as a media giant underpinned by robust technology, premium content, strong cash flow and impressive synergy potential with Genius Sports. Citizens, another analytics firm, agreed with this, saying that the negative reaction shows that investors do not entirely understand Legend’s business model.

Truist’s analysts added that investors might be adopting a reactionary approach to the situation and suggested that Genius Sports might need to better explain the benefits of the deal to its shareholders and is likely going to focus on investor education.

However, Truist also echoed a few concerns related to disruptions tied to AI and prediction markets.

In any case, Genius’s leadership also defended the deal. During a recent analyst call, the company’s CEO and CFO highlighted the positive effect Legend’s technology would have on the broader business and added that the media giant will bring an additional 380 million unique users under the Genius fold.