Daily fantasy sports and sports betting operator DraftKings on Thursday completed its $3.3 billion merger with Diamond Eagle Acquisition Corp. (DEAC) and sports betting technology provider SBTech to form the “only vertically integrated pure-play sports betting and online gaming company based in the United States.”
The deal was approved by DEAC shareholders at a Thursday meeting. The combination will see DraftKings begin trading on the NASDAQ Global Select Market today, April 24, under the ticker symbol DKNG.
The DFS and wagering operator can now go public thanks to its tie-up with DEAC, which is a special purpose acquisition company that went public last May.
Commenting on the recently closed merger, DraftKings co-founder and CEO Jason Robins said that this marks another milestone for the company “and the future of digital sports entertainment and gaming in America.”
Mr. Robins went on to say that “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.”
Mr. Robins will lead the combined company as its Chief Executive Officer. DraftKings will maintain its Boston headquarters as well as US offices in Hoboken, Las Vegas, San Francisco, and New York and international offices in Dublin, Kyiv, Sofia, Plovdiv, and Tel Aviv.
Mr. Robins said that their choice to go public through the acquisition of a SPAC had its advantages over a traditional IPO, particularly in the face of a global pandemic.
In an interview with Yahoo Finance, the DraftKings CEO said that even before the current situation, they had discussed “how the market had been in an 11-year bull run, and it was quite possible with the election approaching that bad news or something could cause a real downturn.”
Mr. Robins pointed that in the event of such a downturn, a traditional IPO would not have protected them the way the SPAC structure does.
DEAC raised $400 million from its IPO in May 2019. DraftKings is now set to add that money to its balance sheet. In addition, it should be noted that the combined DraftKings-SBTech group has around $500 million in cash on hand at a time where every business needs a capital infusion.
Mr. Robins noted that if they had taken the traditional IPO route, they might not have been able to close their combination with the gambling technology provider.
However, DraftKings has finalized the transaction and can now put another $500 million on its balance sheet at a time that raising money is a very challenging task.
Commenting on the current lack of sports due to the global Covid-19 pandemic, Mr. Robins said that this is a temporary situation and that if most sports return this fall, as planned, operators will have some very busy months with NFL, MLB, MLS, NHL, and golf all taking place at once.
Source: DraftKings completes merger that makes it a public company, starts trading Friday
DraftKings, the Boston-based daily fantasy sports company that courted so much controversy a few years ago over whether its contests were a form of gambling, announced Thursday it completed the $3.3 billion merger that will bring the company public. DraftKings has combined with Diamond Eagle, an SPAC (special-purpose acquisition company) that went public last May, which will resume trading on the Nasdaq on Friday under the DraftKings name and the new ticker DKNG.
“It’s a big milestone for us, and I think in many ways some of the things we went through, the different ups and downs and curveballs, make it that much more special,” says DraftKings cofounder and CEO Jason Robins, who will be CEO and chairman of the combined company.
Going public by merging with an SPAC—no road show, no photos on the stock exchange floor, no confetti—may not be what DraftKings employees and investors originally envisioned for the $3 billion tech unicorn. And that was before a global pandemic shut down the entire sports world.
But Robins, in a candid phone interview with Yahoo Finance, says this route has advantages.
In late 2019, before coronavirus was on anyone’s radar, DraftKings was already “having a discussion about how the market had been in an 11-year bull run, and it was quite possible with the election approaching that bad news or something could cause a real downturn,” Robins says. “That was a risk of doing a traditional IPO that the SPAC structure protects against.”
Robins also watched the parade of much-hyped unicorn IPOs in 2019 that stumbled out of the gate, including Uber, Lyft, Slack, and Peloton, and the most visible failure, WeWork shelving its IPO entirely. (FanDuel, which predated DraftKings and was seen as its biggest direct competitor, sold to Irish betting company PaddyPower in 2017.)
Diamond Eagle raised $400 million in its offering last May, money that DraftKings now gets to add to its balance sheet at a time when it needs a capital infusion. SBTech, a back-end betting technology provider, is also part of the merger. The combined company will have around $500 million in cash on hand.
“If this were a traditional IPO, forget ringing the bell, I don’t even think we’d be able to close the transaction,” Robins says. “This way, we close the transaction and put another half a billion dollars on the balance sheet at a time when it’s not very easy to raise money. I hope people view this as an innovative thing we did, much in the same way I hope people view us as innovative on the product side.”
Still, the first thought most onlookers will have is that it’s a strange time for a fantasy sports and betting company to go public: no live sports to bet on.
“That’s a temporary thing,” Robins says. “And as long as our customers continue to engage with us, people will be eager to reactivate when sports do come back. We always have people deactivate at the end of the NFL season, reactivate at the start of the season, so there’s always a seasonality to it anyway.”
On the optimism side, many of the paused sports are looking at moving to the fall, which means an extremely crowded September sports schedule: imagine a fall with NFL, MLB, MLS, NHL, and golf (The Masters has already been re-scheduled for Nov. 12) all happening at once. DraftKings has its fingers crossed for that outcome, but it will also mean preparing for new “operational challenges,” Robins says, like added server capacity and potentially extra customer service staff. (Even with the start of the NFL season in question, the NFL Draft starts on Thursday, airing on ABC, ESPN, and NFL Network; DraftKings is the official daily fantasy sponsor of the NFL.)
DraftKings is also hoping that because of the toll coronavirus is taking on the U.S. economy, more states that were hesitant about legalizing sports betting will move to do so for the tax revenue benefits. (After the U.S. Supreme Court struck down the federal ban on sports betting in May 2018, 15 states have joined Nevada in legalizing sports betting.)
“We always felt like this was about where this business was going to be over the next several years, not the next several months,” Robins says. “So we’re trying to take a glass-half-full approach.”