Sports gambling companies have been a bad hand for many investors to play lately.
The Rounhill Sports Bettng ETF (BETZ) has fallen 30% over the past year, even as more U.S. states have legalized online sports betting.
On a recent episode of "Mad Money," Jim Cramer explored the future of the sector with Eric Grubman, chairman and CFO of Sports Entertainment Acquisition, a special purpose acquisition company (SPAC) that will soon be merging with SuperGroup (SEAH) to become a major player in the beleaguered sports betting sector.
On Jan. 10, Cramer had urged investors to avoid the group, after seeing dramatic spending by gaming companies on promotions after the state of New York legalized betting.
Grubman said that there is always a mad dash for market share whenever a new market opens. He said sports betting is no different. However, these costly promotions are only being offered to introduce new customers to the experience and they will only be offered for limited times, he added.
On Real Money, Bruce Kamich recently looked at shares of online gambling company Draft Kings (DKNG). "Can DKNG rebound to the $31 area? It looks like it, now that a fundamental analyst has put their reputation behind it," Kamich wrote.
Grubman assured Cramer that over the long term, the value of new customers will far outweigh the cost of acquiring them. As long as users are getting a great experience, they will stay for a long time, he added.
As for Grubman's pending SPAC merger, he said their recent analyst day was well attended and he's hoping to receive analyst coverage fairly quickly after the deal closes. That will give sports betting a big boost in exposure and credibility, he said as many investors are skeptical, including Cramer.
