Mattress Mack's record-breaking $75 million payout on a wager that the Houston Astros would win the World Series will cost Caesars and Penn Entertainment big in their digital businesses this quarter.
Jim "Mattress Mack" McIngvale, the Texas furniture salesman who famously hedges his sports bets with furniture promotions, placed $10 million on his beloved Houston Astros to win this year's World Series, across several wagers.
With the Astros' second-ever World Series win on Saturday, McIngvale clinched a $75 million payout. Of that total, Caesars will take the biggest hit, paying out $30 million from McIngvale's May 13 bet on the Astros for $3 million at 10-1 odds.
"I think most of you are aware, we've got a fairly high-profile liability out there with the Astros. So that will be a swing factor in whether fourth quarter is positive as a whole," Caesars CEO Tom Reeg warned on the company's Nov. 1 earnings call.
Penn Entertainment CEO Jay Snowden on the company's Nov. 3 earnings call similarly warned about the company's profitability in light of McIngvale's bet via Penn's sportsbook Barstool — and urged listeners to root for the Philadelphia Phillies instead.
"I think if Mattress Mack doesn't hit, we'll be profitable in Q4," Snowden said then. "If he does, then it'll probably be closer to break-evenish."
The company now has to pay out $10 million.
Wynn, which also hosted one of McIngvale's bets, said it will comment further on the wager on its Wednesday earning call.
McIngvale said he placed other wagers on the Astros at sites including BetMGM, Unibet and Betfred. Texas does not allow legalized gambling, so the mattress salesman often travels to states where it's legal to wager.
Despite the costly hit, Caesars said Saturday after the Astros' win that the wager was worth it.
"What can we say? We just wrote the biggest check in sports betting history to Mattress Mack for $30,000,000. Would we do it all again? You bet," said Ken Fuchs, chief operating officer of Caesars Digital.
Fuchs said a casino the size of Caesars is accustomed to taking big risks.
"You know, for us it's another day at the office in some respect," he said.
Caesars and Penn are each on a path to profitability in their growing digital segments — and investors are adding immense pressure.
DraftKings stock plummeted Friday after CEO Jason Robins predicted higher losses next year than expectations and reiterated that the company doesn't anticipate profitability until the fourth quarter of 2023.
McIngvale, for his part, now has to pay back all of the customers who took advantage of his promotion: Those who spent $3,000 or more on a mattress got their purchase free with the Astros win.
The Gallery Furniture owner says he'll get back his initial $10 million he put in and the rest will go back to the customers.
"It's gonna be pretty much a wash of giving the customers their money back, which is what we really want to do because then word of mouth advertising lasts for 20 or 30 years," he told CNBC ahead of the World Series.
"My real interest is making sure the customers win because the customers will be happy and thrilled and smiling," he said.