Uber considers buying Expedia, the business of calculating odds in sports, gamble on the US elections and Patek unveils their first new collection in 25 years

Greetings, folks, and a warm welcome to the 14th Edition of Friday Finance Weekly. I am sure you are all looking forward to the unusually warm Vancouver weather this weekend. Just kidding. Politics aside, I am genuinely concerned for Trump. He stopped a rally and did an awkward dance for 40 mins. Even Trump was wondering where he was. Okay, let's get into some real news. My thoughts are a little gambling-heavy this week.

According to numerous sources, Uber is considering an acquisition of travel booking company Expedia. Despite its dismal performance in fiscal 2022, a surge in ride-hailing demand, along with its Uber Eats delivery service, have caused the company’s stock price to rally by nearly 80%, eclipsing a market cap of $168B earlier this week.

In addition to its own booking platform, Expedia also owns other travel sites like Hotels.com, Vrbo, and Orbitz. These platforms combined for $28.8B in gross bookings, according to the company’s second-quarter results in August. In recent years, Expedia has grappled with stiffer competition from the likes of Booking, Airbnb, and Google.

Neither company has provided comments thus far, leaving observers to speculate on the strategic purpose of the potential acquisition. Some believe this news suggests that Uber is on the hunt for M&A opportunities that will lead to new monetization streams in markets beyond car travel and food delivery. Some pundits believe this initiative could be part of a broader pursuit of building a fully integrated “super app.”

Following the Financial Times’ report on Thursday, Expedia shares jumped 5%, resulting in a market cap of approximately $21B. Musk has often touted X being a super app, and he has grand plans (that will materialize in 10 years) for it. Instead of buying Twitter, he should have looked at a strategy like this. Imagine a mega merger of Tesla, Uber, and Expedia. A Robotaxi can be ordered on the Uber app, which will drop you at the hotel you booked via Expedia. Ladies and gentlemen, I give you the future. Honestly, though, I find the strategic benefits of an Uber and Expedia merger to be hard to understand. (Source: CNBC)

In the late 90s, a minnow of a betting company named Sportradar partnered with a group of Norwegian coders to create a sports betting software program. The program was designed to scrape odds from the websites of various bookmakers and arbitrage differing odds using an algorithm. Instead of using their software to place bets, Sportradar offered to sell its algorithm to the bookmakers as a service.

Sportradar Group AG is now headquartered in St. Gallen, Switzerland, and provides services to over 900 bookmakers globally. This past year, it oversaw $40 billion in bets placed with its clients, making it one of the largest bookmakers in the world. Sportradar and its peers, including Stats Perform, Genius Sports, and IMG Arena, are responsible for much of the industry’s core number-crunching, leaving sportsbooks (FanDuel, Betway, Bet365, etc.) with the responsibility of branding and marketing (i.e., the pricing of odds and finessing of risk).

As recently as the early 2000s, the odds-making process involved studying newspapers for bare statistics and scouring message boards for insights from devout fans. These methods were considered robust by the standards of the earlier era. Over time, oddsmakers began utilizing more sophisticated techniques, like sending staffers (“data scouts”) to live matches to collect statistics on their behalf and to provide critical feedback based on real-time events. For example, if a striker is crossing the center line with the ball and appears likely to score, the scout would promptly advise headquarters to temporarily suspend betting.

As the popularity of real-time (or “in-game”) betting swelled, oddsmakers looked towards technology to provide ever-mightier quantities of data. In some sports, it became possible to purchase data from the association or the league themselves. In 2021, the NHL allowed bidding for the right to their data over a 10-year term. Sportradar won that auction with a bid of more than $250M, providing it with exclusive access to metrics like speed skating and shot velocity measured by sensors in the pucks or players’ jerseys. The following year, Sportradar reached a $1B cash and equity agreement with the NBA for similar data rights over an 8-year period. Today, Sportradar has 160-odd data deals with sports federations around the world.

As betting engagement has grown, so have concerns around addiction. In 2020, 60% of all British gamblers had placed some kind of in-play bet over the previous four weeks. Furthermore, roughly 40% of Britons gamble at least once every year, and more than a million might be hooked on betting in one form or another. As the prevalence of sports gambling continues to rise in North America, certain tactics like the sale of official game data have given rise to philosophical perplexity around the ethics and legality of the industry. I had never heard of Sportradar prior to reading the article. Today, I also learned that the data from the NBA is worth 4x the data from the NHL. Yet the value of the respective leagues, NBA at around $70B and NHL around $42B, would imply that more people bet on the NBA than the NHL. If you are a statistician, please don’t correct me; my assessment is probably wrong. (Source: Bloomberg)

Let’s bet on something more lively: the US presidential elections. Bolstered by a recently lifted ban on election betting, wagers have been pouring into betting markets as oddsmakers compete with poll results as indicators of what’s to come in November.

Recently, a federal appeals court ruled in favor of allowing betting platform Kalshi to take wagers on the upcoming US election. Kalshi joins PredictIt and Polymarket as the dominant platforms for US election predictions. PredictIt is able to operate because of a loophole, while Polymarket operates because it’s an offshore crypto-based platform.

This month alone, over $12M of bets have been placed on Harris and Trump through Kalshi, while Polymarket, the most widely used platform, has received $1.9B worth of election bets to date.

As of Sunday, one national poll showed Harris leading Trump, while the other showed them as equal. Most election forecasts also show Harris with a slightly better chance of winning. Conversely, prediction markets deviate from the polling results, with Kalshi giving Trump a 55% chance of winning and Polymarket a 56% chance.

Betting enthusiasts chalk these differences up to the more sophisticated forecasting approach used by oddsmakers. Critics argue that prediction markets are simply being swayed by the volume of “dumb money” bets pouring in on Trump. Other interesting odds: Super Bowl Champion (Chiefs - 16%), NBA (Boston - 21%), Highest Grossing Film of 2024 (Inside Out 2 - 91%), Chances of Canada solving the housing crisis (0%). (Source: Morning Brew)

Patek Philippe, the gold standard for high-end mechanical watches, unveiled its first new watch collection in 25 years. Cubitus, which is aptly named after its square-shaped design, hopes to resonate with a trendy urban demographic. The collection debuts in three models: the Platinum Reference 5822P, the vintage-styled 5821/1AR, and the all-steel 5821/1A. The watches are priced at £75,690, £52,480, and £35,330, respectively.

The Cubitus collection will represent the high end of Patek’s sports watch category, joining cheaper models in the Aquanaut and the Nautilus—each of which has extensive waiting lists.

The unveiling of Cubitus comes amidst a marked downturn in the mechanical watch industry. In September, Swiss watch exports declined 12.4%—their worst performance so far this year. When asked about the current state of the market, Patek CEO Thierry Stern expressed his belief that the downturn was more cyclical and reflected the industry returning to more conservative times following a post-Covid exuberance. While Patek’s financials are not disclosed, Morgan Stanley estimates annual revenues of SFr2.1B (US$2.4B), making it the fifth largest manufacturer of Swiss watches. The tagline for Patek is "You never actually own a Patek Philippe. You merely look after it for the next generation." This is fitting because the only way to afford one is to obtain a 30-year loan to finance one. (Source: FT)

Thanks for reading, and have a fantastic weekend. Please don’t hesitate to forward this to friends and family.

Many thanks,

Sam