I came across a fallen tree: Three months on from the announcement of the $1.2bn acquisition of Legend, which lopped over a quarter off the company’s market cap, Genius Sports CEO Mark Locke said the “ferocity” of the share price reaction was a surprise.

• Speaking to E+M for an upcoming Q1 ‘Earnings Debrief’, Locke said that, as with all M&A announcements, the company had expected a – relatively small – negative reaction.
• I felt the earth beneath my feet: But on the day of the announcement, the share price fell 28%, a reaction which Locke claimed was unwarranted.
• “Did we expect it to go down a bit? Yes. But the ferocity of the reaction was more of a surprise to me,” he disclosed.

Oh, simple thing, where have you gone: Locke said poor reception of the news was partly due to factors outside the company’s control, adding it was a “bad day for the markets” generally. But he also admitted to some errors, including assuming too much prior knowledge of the Legend business, which itself had deliberately flown under the radar before it was sold.

• “Nobody knew what it was,” he pointed out. “You’ve got Genius, which is a complicated business, buying a big business relative to our size, which is also quite complicated.”
• “And it’s a business no one’s ever heard of. So, it’s a perfect storm.”

Something to rely on: In place of any equity-market endorsement, Locke said he takes heart from the debt-raise process against the backdrop of a very difficult spring in the debt markets.

• “We secured the money with US Bank, Goldman, Deutsche, Citizens and several other banks on incredibly good terms.”
• “The banks did the same due diligence work on Legend as we did and came to the same conclusion we did. That is a massive validation.”

So tell me when you’re gonna let me in: A further boost came this week after a note from the analysts at Benchmark gave the share price a 20%-plus boost on the suggestion that Genius Sports is set to benefit from recent developments with prediction markets.

• Notably, the analyst is seeing the early signs of engagement between prediction market operators and sports leagues.
• As an important official data provider, Genius Sports could be set to benefit given its “entrenched” relationship with leagues.

Talk about it somewhere only we know? Locke remained cautious in his words around prediction markets, saying the NFL and what it says about integrity and insider trading will ultimately set the tone.

• “The next stage will probably be increased demand for official sports data for the PM operators – trust is everything and official data is a key part of establishing trust,” he added.
• “It won’t be the NFL until they are happy, but we are already seeing that with other sports.”
• Moreover, he said the PM operators understand that for their long-term survival, the support of the leagues is vital.
• “Ultimately, I believe what they need is for their business to become more regulated,” he argued.

I knew the pathway like the back of my hand: Genius’ commercial engagement with the larger prediction market operators is already underway, however. The Polymarket/Serie A deal flagged by Benchmark – with Genius as the official data and integrity provider – is the visible tip of a wider relationship being built.

• “We work with the market makers, who all need good data. We’re already making good money in that market,” Locke said.
• “We’re understanding how it’s working, we work with them on the advertising and the tech side. That’s working really nicely.”
• “We’ve been careful not to move too fast in what is a complicated environment in the US, and that is an overhang on our stock for sure. But I believe it will start to come, and likely soon.”

Sat by the river and it made me complete: The work of repairing the damage done by the Legend announcement began with the Q1 earnings, which showed revenues up 31% YoY to $188m while adj. EBITDA rose by 21% to $24m.

• More importantly, the company gave guidance for pro forma annualized revenues of ~$1bn and adj, EBITDA of $320m-$330m.

Is this the place we used to love? Post-call, Locke said the lessons learned about public life are starting to sink in, adding that “naively” he underestimated the amount of time investors are able to give to understanding the situation with any given stock in their portfolios.

• “The business combination adds a layer of complexity to the public equity story we have been telling for five years now, particularly given Legend was relatively unknown to public market investors,” he said.
• “Ultimately, we think this will be a ‘show-me story’ as we execute and deliver financial results that will force investors to pay attention – but certainly in the first few months post-acquisition, we have seen investor time horizons shorten against the backdrop of a hyper-volatile market.”