Even though there is a suspension on the majority of sports, DraftKings is going public. DraftKings is a company that runs fantasy sports and allows people to bet on sporting events. They announced on Thursday that they would be going public on Wall Street Friday.
DraftKings shares will trade on Nasdaq under “DKNG.” They merged with a special purpose acquisition company named Diamond Eagle Acquisition Corp. By doing this, they avoid going through all the hurdles to allow them to sell new shares. DEAC will pay $2.7 billion in cash and stock for both DraftKings and sportsbook technology supplier SBTech.
DraftKings CEO Jason Robins, who will receive Class B shares to give him about 90% of capital stock voting power, had an interview with CNN Business.
“We have a good story that resonates with investors for the long-term,” Robins said. “It makes total sense to close the deal now at a time where it’s not easy to raise capital otherwise.”
Some may think it is an odd time to go public, but sports will eventually be back. Robins said that the site has gone down in visits since the lack of sports action, but people have found new things to bet on, such as Russian table tennis. They also are having plenty of prop bets for the weekend of the NFL Draft.
“Sports betting is one of the emerging growth areas that technology and media investors are spending a lot of time on, and DraftKings is a pure-play early leader in legal betting,” said Mina Faltas, the founder and chief investment officer of Washington Harbour Partners.
Ever Expanding
DraftKings operates brick-and-mortar sportsbooks in Iowa, Mississippi, New Jersey, and New York. The company relies on its revenue from its New Jersey online casino operations.
Shares opened at $17.81 on Friday morning and closed at $19.35, up 10.3%. Famous investors in DraftKings include Dallas Cowboys owner Jerry Jones, New England Patriots owner Robert Kraft, and Washington Capitals and Wizards owner Ted Leonsis.
Legal Sports Report wrote, “Median estimates suggest $18 billion in online sports betting revenue at maturity and $21 billion in mature iGaming revenue for the US. That gives DraftKings an opportunity to hit anywhere from $2.9 billion to $4.7 billion in annual revenue, according to the investor presentation from December. That includes estimates of 20% to 30% market share for sportsbook and 10% to 20% market share for iGaming.”
DraftKings did report a major loss in 2019 even though revenue grew 43%. They contribute this to launching in three new states and continued development of the platform.
Now that they are public, DraftKings will get a better idea of how hard they have been struggling because of the shutdown in sports. However, they are still positioned well for continued growth in the US.
“By bringing together our leading consumer brand, data science expertise and industry-leading products with SBTech’s proven technology platform, we will accelerate our innovation, growth and scale,” said Robins in a statement.