This microcap is well positioned as the “bank of choice” for online gaming
by James · February 27, 2023
JPMorgan says a little-known microcap financial holding company that began as a West Virginia community bank but is transitioning into a fintech is poised to become the “Silicon Valley Bank” of the online gaming industry. Analyst Steven Alexopoulos initiated research coverage of MVB Financial with an overweight rating, citing its position as the top bank in the online sports betting and gaming industry. MVB Financial, with a market cap of slightly more than $330 million, is headquartered in Fairmont, West Virginia, population 18,000, about 70 miles south of Pittsburgh. Nevertheless, MVB, led by CEO Larry Mazza, currently has an 85% market share in online gaming banking. “Combining a strong management team with an intense focus on serving underserved niche markets with significant growth prospects, MVB has transformed the deposit franchise,” Alexopoulos wrote in a client note Monday. JPMorgan is bullish on MVB as more states legalize online sports betting and additional growth spurts come from providing banking services to the industry. Alexopoulos assigned a $35 price target on MVB shares, suggesting a 40% upside from Friday’s close. But the stock rose as much as 10.2% in early trading Monday. MVBF 1Y mountain MVB Financial in the past year, MVB is uniquely positioned among its competitors, according to the memo, thanks to Mazza’s co-ownership of the website ProFootballTalk. “With CEO Mazza’s co-ownership of ProFootballTalk together with an ambition to bankroll fintechs, this has resulted in MVB going all-in (as the first mover) on this ‘blue ocean’ opportunity to become the bank of choice for online sports betting and online gaming operators,” Alexopoulos said. ProFootballTalk.com “is a key content provider for NBC Sports,” according to MVB’s website. JPMorgan expects MVB to emerge as a “long-term winner” that will outperform competitors in terms of revenue, earnings per share and tangible book value. “Over time, we see MVB becoming the ‘Silicon Valley Bank’ of the online gaming industry,” JPMorgan wrote. “Just as Silicon Valley Bank is the hub that connects the players in the innovation economy, we see MVB establishing a first-mover position with players across the online gaming industry, including operators, technology providers, alternative online gambling providers, as well as media partners.” Online gamblers who deposit money into accounts with FanDuel and DraftKings eventually see that money end up on MVB’s balance sheet, JPMorgan said. MVB now has more than $900 million in online gaming deposits, accounting for 31% of total deposits. As a result, about 50% of MVB’s deposits bear no interest today, up from about 10% as recently as 2017, the bank said. MVB shares are now up about 23% in 2023 after falling 47% in 2022. Disclosure: CNBC is owned by Comcast’s NBCUniversal. — CNBC’s Michael Bloom contributed to this report.
