The sport of fighting, MMA, is also widely believed to be the fastest growing sport in the world. But it gets little attention from the financial media largely because there haven’t been many pureplay ways to invest in the idea.
However, one small OTC stock is threatening to change that with an emerging level of traction that could send it into the spotlight before long.
B2Digital Inc (OTCMKTS:BTDG) frames itself as “the premier development league in MMA”. This phrasing is justifiably deferential to Endeavor Group Holdings, Inc. (NYSE:EDR), which owns UFC. But EDR is not a pureplay vehicle because it has a broad list of holdings, many of which have nothing to do with combat sports (ie, modeling agencies, broad entertainment properties, etc).
In fact, EDR shares have been dragged down in recent action, but that comes despite huge outperformance by its sports properties segment, where revenue grew 22% to $283.5 million in the quarter, due to more events and higher media rights and sponsorship fees at UFC. In other words, if UFC were trading separately, the stock might be booming higher right now.
BTDG is only other clear proxy for that growth thesis, but it hasn’t yet been found by the mainstream investment crowd. However, based on the evolution of its interesting model, that might just be a matter of time.
Deepening Signs of Traction
B2Digital Inc (OTCMKTS:BTDG) is seeing strong growth from aggressive investments made over the past pandemic year-plus, or so it would seem from a quick survey of its recent announcements.
The themes you will find there are about equipment purchases, training facilities acquisitions, and a massive jump in event distribution and the pace of live “B2FS” MMA events.
From its April 27 release:
“We are seeing a number of very positive trends and dynamics crystallizing in recent performance data from our Live Events,” commented Greg P. Bell, Chairman & CEO of B2Digital. “We felt it deserved to be addressed through official communications both because recent data highlights important new trends and in the spirit of increasing transparency in response to inquiries we have received from a number of shareholders.”
The release also noted that both the rate of events per month and the contribution of PPV sales are seen as escalating versus pre-pandemic assumptions, with PPV sales increasing 1,550% on average, per event, compared to pre-pandemic levels, and the Company now on pace to put on 50 or more events per 52-week period, which represents an increase of roughly 100% as compared to pre-pandemic levels.
Bell added, “The upshot is this: through updates and investments in our team, equipment, and expertise, we have acquired the capacity to put on Live Events at a much faster pace than we have in the past. At the same, our PPV marketing has evolved to produce much better results, and we are also likely approaching the end of live crowd attendance restrictions before too much longer, which should have a large impact on cash flowing in the door, especially given the accelerated frequency of our events. Finally, we are also likely on the doorstep to beginning the process of monetizing our brand and events through the sponsorship channel. That is another significant factor that we believe will become a major part of our longer-term strategic roadmap.”
The other dynamic that suggests this story is gaining important traction and rounding a key corner comes from signals about how both sides of the B2Digital Inc (OTCMKTS:BTDG) model appear to be working in harmony.
BTDG has two primary segments: the B2 Fighting Series and the B2 Training Network. This basically boils down to Fights and Gyms.
The Fighting segment operates as an entertainment model, where MMA content is created and sold for tickets to both live and PPV audiences. The Gym segment operates as a fitness facility model, where memberships are sold to customers looking to get fit and learn MMA skills.
These two models have enormous synergies – the former functions as a branding channel for the latter, while the latter functions as a talent recruitment and development channel for the former.
The main point we would make here is that both seem to be exhibiting accelerating growth – with the number and success of live events rapidly growing and the number and success of training facilities doing the same at the same time.
We would also point out that both of these idea independently represent very good “reopening” trades – they both should see a large additional performance tailwind from the simple fact that we are emerging from the pandemic, which limited sporting event crowds and gym attendance.
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