Codere Online MD Moshe Edree: Tighter gaming regulations will reduce international competition

Tell us a bit about your core casino business, and how and when you shifted your focus to digital gaming?

Codere Online is a subsidiary of Codere Retail Group, which is one of the most reputable brands in Latin America and Spain. It’s a gaming company that was established more than two decades ago. And in the past four years, we are shifting our strategy from retail to online. 

Codere’s expansion potential is in Latin America itself — in Mexico, Colombia, Puerto Rico, Panama, Buenos Aires, etc. Of this, Mexico, Colombia, the City of Buenos Aires, and Panama are already regulated and we assume that Puerto Rico will be fully regulated mid-next year. And then we’re obviously looking to expand to Brazil when it becomes regulated because this is the most interesting future market overall in the continent. 

A year ago, we decided that we wanted to go for a fundraising. And we found out that there’s a group called DD3, which had a previous successful SPAC in NASDAQ. And we started the process and are aiming to close, and have a shareholder vote in the next couple of weeks that will allow us to receive a fund for future expansion investment in the market and to fulfill our strategy to become the market leader of online gaming in Latin America. 

Do you see your existing traditional casino clients shifting to online gaming, or is that an entirely new demographic in the online gaming space?  

We do see a lot of correlation between retail and online. But that’s from the aspects of the omnichannel strategy, meaning working with the retail part and moving some of the activity online. We started implementing it already in Mexico, where Codere has over 100 retail shops. 

We identify the player segments that fit the online strategy. It is mainly sports players, rather than casino players. Casino players are more slot-oriented. So what we’re doing is to identify who can be the potential clients. Then we approach them either through the retail or through the database that we have. 

Codere has more than three million registered players in the database. So that’s a huge amount of data that we can use. And we’re working on that data in order to convert it online. Aside from that, we have a full strategy going forward to give the player a unique and seamless gaming experience between the retail and the online and vice versa. 

We believe that we can build a proper one-stop-shop for the player that can play both on retail and online, getting promotions from both sides, being then invited to promotions and events from both sides, and so on. 

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How do you see the regulatory landscape in the markets where you operate?   

Regulation is a big part of our business. Obviously, Codere is operating only in fully regulated environments. Not taking any risk of operating in any country that is even semi-regulated. Like Brazil, for instance, even though there are public companies that are operating in Brazil. 

You need to regulate the software itself and then you need to be in a full process with the regulators in regards to money laundering procedures, KYC, taxation, etc. So that’s kind of like an operational hassle that you need to go through. In Spain, for instance, since Covid started, the regulator enforced restrictions on advertising. 

We were prohibited from doing any kind of marketing or advertising activity during the day. So those changes had a big impact on the industry in general. But I believe the tighter and restrictive the regulation is, for us as a retail operation and local brand, it gives us an advantage. With retail that will allow us to have an omnichannel strategy, it will eliminate a lot of international competitors. And as the regulations are getting tighter and harder, there’s less appetite for international brands to get into the country. 

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Why choose the SPAC route?

There were three options — either to go through a full IPO process, go to a SPAC, or go with a strategic or financial investor. Financial investors were quite difficult in the sense that it’s hard for them to understand the nature of the business. It was extremely important for us to keep the majority stake in Codere. So in any scenario of the de-SPACing process, the mother company would end up as a majority shareholder in Codere Online. So that was the first requirement. 

Secondly, we found out that the DD3 team is very professional. They are a very successful SPAC. If I’m not mistaken, their previous SPAC had the best performance in 2021. And they are based in Mexico. 

How will this impact the share price going forward?

I believe that we need to deliver on our business and the share will adjust to the actual value that we will create for shareholders. So we are very focused on what we are doing. On the operational side, we are focused on expanding to Mexico, Colombia, and Panama. We are busy improving our technology and product, and we believe that all the rest will come after that. 

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What is going to be the management’s higher priority in the short term – scaling up or achieving profitability? 

Scaling up. There will be three years of extreme marketing spend on a cohort basis. We have some expenditure mainly on the software, and the product itself, but it’s not a big part of the investment. If I’m not mistaken, by 2025the company should turn into an EBITDA positive business.

We are all about scaling up. The major market would be Mexico, then Columbia, and the City of Buenos Aires, which is the third most populated city in Latin America after some propaganda. So it’s a great potential. Codere has a strong retail presence in the province of Buenos Aires.  Our hands are full with a lot of projects with many exciting things to happen. We want to get to the finish line of this transaction, which will happen in the next couple of weeks.