Amid the sweeping restructuring that beleaguered Codere in 2021, its digital arm was primed for a bold new chapter. The merger with a special purpose acquisition company, DD3 Acquisition Corp, led to a Nasdaq debut and marked its beginning as an independent operation.
As an aspirant in the regulated igaming space of Latin America, the opportunities for Codere Online seemed limited at first. Bar the competitive market in Colombia, notable prospects were scant. With regulation hopes dimming in Brazil and a glacial pace in Argentina’s province-by-province enactment, Codere Online searched for a foothold. Talks of regulations in Peru and Chile remained just conversations.
Fast forward, and the landscape is markedly transformed. Brazil is now considering igaming alongside online sports betting, and both Peru and Chile are moving closer to definite regulations. This shift in the regulatory environment breathes life into Codere Online’s ambitions.
Spain and Mexico, however, have arisen as pivotal markets for the operator. Yet, in Europe, strict ad restrictions akin to a prohibition hamper marketing initiatives. Nonetheless, Aviv Sher, the Chief Executive Officer, contends the company’s prior engagement in Spain laid the groundwork for success. With five years of intense investment in the market before the ad ban, Codere Online strategically situated itself to capture essential market share as regulations evolved.
The investment in brand identity, showcased by its sponsorship of Real Madrid, fortifies the company’s ability to maintain market presence and consolidate the player base established during the past years. Sher maintains that even today, the Real Madrid sponsorship amplifies brand recognition.
Moreover, Codere’s brick-and-mortar presence in Spain reinforces this visibility. Sher notes a sense of comfort within the Spanish market, which has led the company to reallocate investments towards Mexico—a relatively newer but rapidly rewarding market. Q3 witnessed Mexico surpass Spain as the company’s largest revenue generator, accounting for nearly half of the group’s total earnings.
“We are zeroing in on Mexico, redirecting resources to bolster our standing and vie with prominent competitors,” Sher divulges. He draws a parallel to Spain, highlighting the advantage Codere Online gained by investing early—before the entry of larger operators.
Further emphasizing the company’s strategy, Sher underlines that Mexico’s significance is not just a one-off but a consistent trend, particularly accentuated by Spain’s advertising ban. This trend deems Mexico an investment focal point, foreseeing a future there.
Yet, as Codere Online navigates these developments, Sher is acutely aware of its nascent startup status, where cost discipline is crucial. The company’s focus is confined to fully regulated markets, offering legal stability and clear visibility on potential costs.
“We operate only within known tax frameworks, where the economic picture is clear,” Sher elaborates, stressing this approach as a risk management strategy, shunning grey markets that could see promising margins eroded by unforeseen taxes.
Certain markets offer more allure. Peru, with its lower tax rates, beckons, as does Panama. Buenos Aires in Argentina is touted as a potential rival to Mexico in terms of market size for Codere Online, but for now, Brazil’s sports betting and igaming market remains out of reach given its Portuguese language barrier and profound cultural differences.
Sher envisions joint ventures or additional fundraising to enter the Brazilian market, emphasizing the need for substantial capital to compete effectively.
Codere Online’s path hinges on its profitability, with Q3 2023 marking its first EBITDA-positive quarter. Currently restricted from taking on more debt due to economic conditions, sustainable earnings remain a critical goal.
The focus isn’t strictly on Latin America; the enterprise eyes the sizeable Hispanic population in North America, namely in the US states like Florida, Texas, California, New Jersey, and New York. According to Sher, strategic partnerships with major American casinos or technology firms are under consideration to facilitate this expansion.
As Codere Online continues its meticulous pursuit of growth, it strives for a valuation reflective of its potential—focusing on Spanish-speaking markets where it can evolve efficiently. Having debuted at a time when regulated markets were sparse, and in a climate where Latin American igaming is burgeoning, Codere Online poises itself to become a significant player in the region. With the industry’s gaze fixed on Latin America, Codere Online is executing deliberate maneuvers to stake its claim in this dynamic and evolving marketplace.
