Note: This post is an updated version of my August 25, 2025 post entitled “Unlocking IRR: Playtech’s Strategic Impact on NorthStar Gaming“, taking into account recent developments.

When businesses make investments in other businesses, a key metric they consider is Internal Rate of Return (IRR). In simple terms, the IRR represents the expected compounded annual return on an investment. A higher IRR indicates a more profitable use of capital. If the IRR of a project exceeds the opportunity cost of capital, it is generally considered a worthwhile investment.

Target IRRs vary depending on risk. More conservative projects may demand 12–15%.Riskier or longer-term ventures may demand 20–30% or more.

Looking at NorthStar Gaming (TSXV: BET) through this lens leads to an interesting question:

What kind of IRR might its strategic partner, Playtech (LSE: PTEC), expect from the relationship?

The Ugly Situation

At current prices, NorthStar’s equity appears to be trading as though the company is hurtling towards bankruptcy.

With the share price around $0.01–$0.02, the company’s market capitalization is only $2–4 million CAD — an extremely low valuation for a regulated gaming operator generating nearly $1 billion in annual betting handle.

This skepticism is understandable. The company carries roughly $43M of senior debt, has not yet reached profitability, is burning cash, and operates in a highly competitive industry.

However, the presence of Playtech as both strategic partner and economic participant complicates the bankruptcy narrative.

Playtech is not simply a technology vendor or minority shareholder. It occupies a layered strategic position that includes:

• Significant equity ownership
• Warrants tied to the company’s debt financing
• Significant Recurring technology and service revenues
• Deep board representation and strategic influence

Viewed together, these elements suggest that NorthStar is a structured strategic investment for Playtech — one designed to produce attractive returns across a range of possible outcomes.

Playtech’s Position

Playtech has embedded itself into NorthStar through several channels:

Equity ownership
Approximately 25% of BET today, with warrants that could increase ownership to roughly 45–50%.

Warrants
32.7 million warrants exercisable at $0.055, issued in exchange for guaranteeing NorthStar’s ~$43M debt package.

Service revenues
Playtech receives an estimated 40–50% of NorthStar’s Gross Gaming Revenue (GGR) through technology and operational service agreements.

Strategic influence
Two board seats, seats on several committees, and the role of debt guarantor give Playtech meaningful influence – if not de facto control over NorthStar’s strategic direction.

This layered structure allows Playtech to benefit in multiple ways:

• recurring service revenues
• equity appreciation
• strategic influence over the company’s development

The Service Fee Model

The Q2 2025 financials show service provider fees of approximately $3.37M, nearly half of reported GGR.

Annualized, this equates to roughly $12–15M flowing to Playtech.

If NorthStar’s handle grows from its current ~$1B run-rate to approximately $2B over the next five years, Playtech’s annual service revenue could reach $30–35M.

Importantly, these revenues are largely independent of NorthStar’s bottom-line profitability, insulating Playtech from many of the operational risks faced by the operator itself.

Warrants and Equity

The warrant package represents another lever.

At $0.15/share, the warrants would be worth approximately $5M, roughly a 3x uplift on exercise cost.

At $0.30/share, the value approaches $10M, a ~5x return.

Combined with Playtech’s direct equity ownership, these warrants provide significant upside participation if NorthStar successfully scales.

Playtech IRR Scenario Chart

Below is a simplified view of what Playtech’s potential returns might look like over a five-year horizon.

Key takeaway:

Even in relatively conservative scenarios, Playtech still generates positive returns due to recurring service revenues. This structure provides multiple paths to investment success.

Per-Share Valuation for BET

Applying typical gaming industry multiples to potential future GGR gives a rough sense of what NorthStar’s equity could look like under different scenarios.

These directional estimates highlight the range of possible outcomes relative to today’s ~$0.015 share price. Wishful thinking? Perhaps. But lets look at what is quietly occurring.

A Strategic Shift in 2026

Recent developments suggest NorthStar is entering a more disciplined operational phase.

In late 2025, founder Michael Moskowitz stepped down as CEO, with co-founder Corey Goodman appointed Interim CEO.

The company has since outlined a strategy centered on:

• improving advertising efficiency
• reducing operating expenses
• moving toward profitability

Management expects roughly $3M in annualized G&A cost savings, alongside additional operational efficiencies.

Governance has also been strengthened through new board and committee appointments aimed at improving oversight and regulatory compliance.

These changes suggest a shift from growth-first execution toward operational discipline and capital efficiency.

The Lender Question

The real elephant in the room is NorthStar’s $43M senior debt facility provided by Beach Point Capital.

It is large. And expensive. It carries a high interest rate and includes liquidity covenants that require careful financial management. And it needs to be addressed soon.

However, the structure may actually reinforce Playtech’s strategic positioning.

The facility refinanced earlier loans previously provided by Playtech. In doing so, Playtech effectively transferred near-term balance sheet risk to a third-party lender while maintaining its strategic role.

In return for guaranteeing the loan, Playtech received the warrant package discussed earlier.

The resulting structure allows Playtech to:

• maintain influence over the company
• limit incremental capital exposure
• retain substantial equity upside
• continue collecting recurring service revenues

What seemed like a desperation financing move also resembles a structured strategic move from from Playtech.

Comparison to Snaitech

Playtech’s approach here resembles its earlier strategy with Snaitech in Italy.

Playtech acquired a controlling stake in Snaitech in 2018 for about €846M (enterprise value ~€1.05B). Six years later, in June 2024, Playtech agreed to sell Snaitech to Flutter Entertainment for €2.3B EV.

This translated into an IRR of roughly 20–22% over a 6–7 year holding period.

That return came from:

• Scaling / multiple expansion
• service revenues and cash distributions

The difference with NorthStar is that Playtech appears to have structured the investment with far less upfront capital commitment.

Instead of acquiring control outright, Playtech secured influence and upside through:

• technology agreements
• warrants
• minority equity ownership
• debt guarantees

The potential IRR relative to capital invested may therefore be significantly higher.

Implications for Investors

For NorthStar shareholders, the key point is that Playtech is structurally incentivized to grow and support the business.

Service revenues give Playtech predictable returns, while warrants and equity ownership align them with shareholder value creation.

Viewed through the IRR lens, NorthStar is not simply a small-cap operator attempting to survive.

It looks like a strategic platform through which Playtech has engineered a potentially attractive revenue / investment structure – And has a deep vested financial interest in ensuring its continuation.

Closing Thought

Whether this alignment ultimately translates into shareholder returns for BET (and, to a much lesser degree, PTEC) depends on Northstar successfully avoiding insolvency and operationally scaling into a stronger position. This is a risky BET (Pardon the pun).

But the presence of Playtech — and the way the partnership has been structured — changes the framing.

NorthStar is not simply an independent, struggling small-cap gaming company. It is a customer / revenue channel sending 10 million dollars plus per year, from an expanding market, upstream to its largest shareholder. Different Frame Indeed.

Disclosure
The author is a NorthStar Gaming shareholder. The author is not compensated in any way by NorthStar and has no commercial or financial relationship with the company except as a shareholder.