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SINCLAIR AGREEMENT | 12 Months Ended
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Dec. 31, 2020
Business Combinations [Abstract] |
Sinclair Agreement | SINCLAIR AGREEMENT On November 18, 2020, the Company entered into the Sinclair Agreement, which provides for a long-term strategic relationship between the Company and Sinclair combining Bally’s integrated, proprietary sports betting technology with Sinclair’s portfolio of local broadcast stations and live regional sports networks and its Tennis Channel, Stadium sports network and STIRR streaming service, whereby the Company will receive naming rights to the regional sports networks and certain integrations to network programming in exchange for annual fees paid in cash, the issuance of warrants and options, and an agreement to share in certain tax benefits resulting from the Transactions with Sinclair (the “TRA”). The initial term of the agreement is 10 years from the commencement of date of the re-branded Sinclair regional sports networks and can be renewed for one additional 5-year term unless either the Company or Sinclair elect not to renew. Naming Rights Intangible Asset The Company accounted for this transaction as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of ASC 805-50 using a cost accumulation model. The Company acquired a Naming rights intangible asset, the value of which was determined to be $332.3 million on the November 18, 2020 acquisition date, representing the consideration transferred on the acquisition date which was comprised of the present value of annual naming rights fees, the fair value of the warrants and options and an estimate of the TRA payments, as discussed in further detail below. The Naming rights intangible asset will be amortized on a straight-line basis over a useful life of 10 years, which has been determined to be the period of anticipated benefit and is consistent with the term of the Sinclair Agreement. Amortization will begin upon the commencement date of the re-branded Sinclair regional sports networks which had not occurred as of December 31, 2020. As such, there was no amortization expense for the year ended December 31, 2020. Annual Naming Rights Fees Under the terms of the Sinclair Agreement, the Company will be required to pay annual naming rights fees to Sinclair for naming rights of the regional sports networks which escalate annually and total $88.0 million over the ten-year term of the agreement and begin on the commencement date of the re-branded Sinclair regional sports networks. The present value of the annual naming rights fees was recorded as a liability and will be accreted through interest expense over the life of the agreement. The value of the liability as of December 31, 2020 was $56.6 million, of which $54.6 million and $2.0 million is presented as “Naming rights liabilities” and “Accrued liabilities” in the consolidated balance sheets, respectively. Accretion expense for the year ended December 31, 2020 was $0.5 million and was reported in “Interest expense, net of amounts capitalized” in the consolidated statements of operations. Warrants and Options The Company has issued to Sinclair (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share (“the Penny Warrants”), (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $0.01 per share subject to the achievement of various performance metrics (“the Performance Warrants”), and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (“the Options”). The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments. The issuance pursuant to the warrants and options of shares in excess of 19.9% of the Company’s currently outstanding shares was subject to the approval of the Company’s stockholders in accordance with the rules of the New York Stock Exchange (“NYSE”) as of December 31, 2020, and prior to stockholder approval the Company would have been required to pay cash to Sinclair in lieu of Sinclair being permitted to purchase, pursuant to the exercise of warrants or options, greater than 19.9% of the Company’s outstanding common shares. The Company formally obtained stockholder approval on January 27, 2021. As of both November 18, 2020 and December 31, 2020, the Company evaluated the classification of the Penny Warrants, Options and Performance Warrants under ASC 815-40 to determine whether equity classification was precluded for one or more of the warrants and options as a result of the requirement to net cash settle any option of the contracts that result in the delivery of shares in excess of the 19.9% threshold prior to obtaining stockholder approval. Since a portion of the warrants and options could be settled in shares below this threshold, the Company adopted a sequencing policy as prescribed in ASC 815-40-35 whereby it would allocate available shares under the 19.9% cap to contracts based on the order in which they become exercisable. This resulted in the allocation of available shares to the immediately exercisable Penny Warrants first, the Performance Warrants second and the Options, which contain a four-year vesting period, third. This policy results in there being a sufficient number of shares below the 19.9% cap to settle the Penny Warrants, but an insufficient number of shares to settle the Performance Warrants and Options. The Company accounted for the Penny Warrants as an equity classified instrument because they are indexed to the Company’s own stock and meet the conditions to be classified in equity under ASC 815, including sufficient available shares for the Company to settle the exercise of the warrants in shares. The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $150.4 million on November 18, 2020 at issuance, recorded to “Additional paid-in-capital” in the consolidated balance sheets, with an offset to the Naming rights intangible asset. The Performance Warrants were accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815. The fair values of the Performance Warrants as of November 18, 2020 and December 31, 2020 were $55.2 million and $88.1 million, respectively, and were calculated using an option pricing model, considering the Company’s estimated probabilities of achieving the performance milestones for each tranche. Inputs to this valuation approach include volatility between 55% and 60%, risk free rates between 0.34% and 0.52%, the Company’s common stock price of $30.61 and $50.23, and expected terms between 4.4 and 6.0 years. The initial fair value as of November 18, 2020 was recorded as a liability with an offset to the Naming rights intangible asset. The fair value as of December 31, 2020 was reported in “Naming rights liabilities” in the consolidated balance sheets The increase in fair value of the Performance Warrants from November 18, 2020 through December 31, 2020 was $32.9 million and resulted in a mark to market loss, reported in “Change in value of naming rights liabilities” in the consolidated statements of operations. The Options were accounted for as a derivative liability because the Options could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval. Until stockholder approval is obtained, the Options will be recorded at their fair value with changes in fair value recognized in the statement of operations. The fair value of the options was initially measured as a liability on November 18, 2020 upon issuance with an offset to the Naming rights intangible asset. The fair values were based on Black-Scholes models using Level 2 inputs, including volatility of 60% and 55%, a risk free rate of 0.95% and 0.99%, the Company’s common stock price of $30.61 and $50.23 and the term of 11.0 years and 10.9 years, which resulted in total values of $33.4 million and $58.2 million as of November 18, 2020 and December 31, 2020, respectively. The fair value of the Options was reported in “Naming rights liabilities” in the consolidated balance sheets as of December 31, 2020. The increase in fair value of the Options from November 18, 2020 through December 31, 2020 was $24.8 million and resulted in a mark to market loss, reported in “Change in value of naming rights liabilities” in the consolidated statements of operations. The Options met the criteria to be classified as equity upon stockholder approval on January 27, 2021, at which point the Options were adjusted to fair value and $59.7 million was reclassified from Naming rights liabilities to “Additional paid-in-capital” in the consolidated balance sheet. The Performance Warrants are expected to continue to be classified as liability awards, with changes in fair value reported in earnings. Tax Receivable Agreement The Company entered into the TRA with Sinclair as an additional form of consideration for the acquisition of the Naming Rights Intangible Asset. Under the TRA, the Company is required to share 60% of the tax benefit the Company receives from the Penny Warrants, the Options, the Performance Warrants and payments under the TRA, which are payable to Sinclair over the remaining term of the agreement once the tax benefit amounts become finalized through the filing of the Company’s annual tax returns. The Company accounted for the obligations due under the TRA as contingent consideration in the acquisition of the Naming Rights intangible asset pursuant to ASC 805 and has recorded a liability of $37.1 million as of the acquisition date of November 18, 2020. Subsequent to the acquisition date, changes in the TRA liability due to estimates of the tax benefits to be realized as well as tax rates in effect at the time among other changes are treated as an adjustment of the acquired Naming Rights intangible asset. As of December 31, 2020, the estimate of the TRA liability was $43.0 million, reflecting an increase of as of $5.9 million from the acquisition date, which was recorded as an increase to the Naming rights intangible asset. The ending Naming rights intangible asset as of December 31, 2020 was $338.2 million. The TRA liability is reported in “Naming rights liabilities” in the consolidated balance sheets.

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- Definition The entire disclosure for collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -URI http://asc.fasb.org/topic&trid=5833765 + Details
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