Fantasy sports and sports betting giant DraftKings has priced its public offering at more than $1.66 billion, and the proceeds will be split between the company and four selling shareholders, in a deal overseen by Sullivan & Cromwell LLP, Greenberg Traurig LLP, Paul Hastings LLP, and White & Case LLP.
In a recent statement. DraftKings Inc. said that the offering is for 32 million shares priced at $52 each, equaling more than $1.66 billion. Half of the 32 million shares are being sold by DraftKings and the rest by other investors. However, DraftKings will only receive funds from selling its shares, which will be used for general business purposes.
Finally, the underwriters have a 30-day option to buy an additional 4.8 million shares, which could raise another $250 million. Credit Suisse Securities LLC and Goldman Sachs are the lead underwriters for the offering.
DraftKings is represented by a Greenberg Traurig LLP team including Greg Cooper and John Jeppsen as well as Ronald Creamer Jr., Scott Miller, Franklin Liu, and Benjamin Kuder of Sullivan & Cromwell LLP.
The underwriters are represented by a White and Case LLP team including Jonathan Rochwarger, Joel Rubinstein, Sarah Ross, Elliott Smith, and Jared Coppotelli, as well as a Paul Hastings LLP team including Holly Flynn and Behnam Dayanim as gaming regulatory counsel.
DraftKings Making Deals
The follow-on offering a few weeks after DraftKings announced that NBA superstar Michael Jordan would serve as a special adviser to the board of directors. The position gives Jordan an equity stake in the company. However, the size of the equity stake acquired by Jordan has not been disclosed.
DraftKings went public this last spring following a merger with blank-check company Diamond Eagle Acquisition Corp. The deal was signed even though DraftKings faced substantial headwinds due to the financial difficulties resulting from the coronavirus shutdowns and the postponement or cancellation of major league sports worldwide.
The plan to go public was originally announced late last year, when DraftKings disclosed a three-way merger deal with SBTech Ltd. And Diamond Eagle. SBTech Ltd. develops software for sports betting and casino platforms. The combined company assumed the DraftKings name.
The Recent DraftKings Stock Offering
While the stock offering of $52 per share is much higher than DraftKing’s original stock price of $19.35 per share when it began publicly trading on the Nasdaq in April, it’s still below the high of nearly $64 per share on October 2, and its recent closing price of nearly $57 per share.
According to a filing with the U.S. Securities and Exchange Commission, the selling stockholders this go-round include DraftKings directors and executive officers.
DraftKings has indicated that the COVID-19 shutdowns have actually resulted in an increase of revenue this quarter; this is because millions of people were forced to stay at home, and they resorted to sports betting and online gambling to alleviate their boredom. However, going forward, the company cautioned that its business model still depends on professional sports playing as they usually do.
DraftKings hasn’t yet finalized its financial results from the third quarter but anticipates revenue between $131 million to $133 million. That’s an increase of 97% from the same period last year.
The company also noted a much higher response to its advertising, with many more unique users compared to the third quarter of 2019.
The company said in the recent earnings report that, “We expect our online sports betting handle for the three months ending September 30, 2020, to have grown approximately 460% compared to the same period last year. That includes a 110% growth of online sports betting handle growth in New Jersey.”
COVID-19 Could Hurt DraftKings
However, the company cautioned that COVID-19 has had a substantial impact on its business, including by the cancellation and postponement of professional sports games, for the entire season. Ultimately, the pandemic and the accompanying shutdowns and restrictions make for an uncertain future.
DraftKings has had to issue refunds for bets placed on sporting events that were canceled, and some casinos using DraftKings as their retail sportsbook remain closed or are operating with a limited capacity.
“DraftKings revenue depends on major sporting events and sports seasons, and the company may not generate as much revenue as we could have without the postponement or cancellation of these events due to COVID-19,” it said.