Tom Waterhouse BetMakers stock could be used to short firm

Waterhouse holds a big stake in BetMakers from a commercial deal he has with the company, but some of his stock could be being used to short shares.

Tom Waterhouse is now an investor in gambling stocks after a previous career as a bookmaker. Picture: Britta Campion

Former bookmaker turned gambling industry investor Tom Waterhouse has lent stock that could be being used to short BetMakers – a gaming technology business that he has a long-term commercial arrangement with.

Mr Waterhouse has emerged as one of the biggest shareholders in BetMakers in the past year, receiving performance rights that have vested into share options that he has then converted to equity as a result of a commercial deal struck in 2020.

Documents lodged with the ASX show the Waterhouse VC fund – a wholesale gambling investment fund launched by Mr Waterhouse that holds his BetMaker shares – recently lent some of his stock to Macquarie.

BetMakers is currently one of the most shorted stocks on the ASX in proportional terms, with more than 12 per cent of its shares said to be in the hands of shorters.

Some at BetMakers believe it is the investment bank that is behind the short selling of its shares.

Other stocks in which investors hold big short positions include travel agency Flight Centre, e-commerce business Kogan.com and sports betting firm Pointsbet.

The arrangement is not illegal, nor is The Australian suggesting any wrongdoing by Mr Waterhouse or Macquarie. He could not be contacted on Thursday.

But the deal does mean Mr Waterhouse benefits even if the BetMakers share price drops from the fees Macquarie pays. He received the shares at below market prices from BetMakers in return for the ASX-listed firm supplying another arm of the Waterhouse business empire with back office technology.

BetMaker shares have fallen more than 20 per cent this year, though rose 10 per cent in trading on Thursday to close at 66c.

BetMaker shares are down about 31 per cent in 12 months.

Tom Waterhouse recently lent stock to Macquarie. Picture: Bloomberg

BetMakers management struck a deal two years ago to provide data and technology to a tomwaterhouse.com betting aggregator app and an odds trading operations outsourcing service in a joint venture. BetMakers made more than $8m revenue from the deal in the six months to December, and $6m in the previous half of the 2021 calendar year.

The revenue saw about 34 million performance rights for Mr Waterhouse vest and convert into share options that he first exercised at 18c per share in July

Mr Waterhouse exercised options over another 45.9 million BetMakers shares in January also at 18c per share. In January, BetMakers said it expected the remaining 14.3 million rights issued to Waterhouse VC to vest during the current six month period to June 30 based on the commercial performance of its technology services arrangement with tomwaterhouse.com.

Mr Waterhouse has made his BetMakers shares a major focus on his Waterhouse VC investment fund, which claims to have returned 53 per cent in the past 12 months by investing in gambling focused stocks in Australia and several countries overseas.

Tom Waterhouse has said he focuses on investing in businesses that provide services to the gambling sector. Picture: Getty Images

In a note to clients earlier this week, Waterhouse VC said it has achieved a total return of 2091 per cent since inception in August 2019. Mr Waterhouse has previously told The Australian that his fund has put a particular focus on investing in businesses that provide services to the gambling sector.

“We’ve probably looked at about 80 stocks … and typically we like to operate in that $100m to $300m (market cap) space, where maybe there’s not as many analysts covering stocks and there’s opportunities,” he said last year.

Some of his holdings are big companies such as Flutter Entertainment, the London-listed owner of the Sportsbet brand in Australia. Other positions include Aspire Global, a Stockholm-listed provider of online casino platforms and services, and PlayUp that holds betting and iGaming licences in the US.

It has proven to be a lucrative strategy for Mr Waterhouse and his investors. A 2 per cent management fee for his fund is calculated monthly and a performance fee of 20 per cent is charged based on the unit price an investor enters at.

Mr Waterhouse took up investing after a chequered bookmaking career that saw him emerge as the controrsial face of the betting industry.

Macquarie declined to comment when contacted.

Originally published as Tom Waterhouse BetMakers stock could be used to short firm