Sports betting giant DraftKings maintains a massive 60% share of the market, and analysts predict the company could be worth billions in a few years. As more states legalize sports betting, DraftKings’ market continues to expand. Now, as DraftKings continues to expand its operations throughout the United States, the company has announced that it is going public.
DraftKings Unconventional IPO
DraftKings is offering an IPO, and the news is making investors eager to get in on the action. But if investors expect a conventional IPO process, they may be in for a surprise.
For decades, fantasy sports has been a popular feature of sports culture. The first known fantasy sport created by Bill Winkenbach, an Oakland businessman, back in the 1950s.
Fantasy sports involve the participants building imaginary, super teams with real league players. The way it works is, the statistics for each player on a participant’s team delineates the fantasy team’s overall score.
Jump to the year 2012, and friends Paul Liberman, Jason Robins, and Matt Kalish come up with DraftKings. They saw the potential that playing daily fantasy sports could be superior to simply playing in-season. Within just a few years, DraftKings was an international phenomenon.
Right now, DraftKings offers fantasy sports experiences encompassing 13 sports; these include NFL football, Major League Baseball, NASCAR, the National Hockey League, and Ultimate Fighting Championship. DraftKings currently operates in nine U.S. states as well as eight countries. Check our article on DraftKings Iowa expansion from last year here.
What makes DraftKings popular is that they offer multiple daily contests where users can win prizes and cash. There are even free and beginner contests for the sports fan just getting started with fantasy sports. The company also allows users to create their own leagues, so they can play privately with family and friends.
Why DraftKings is launching an IPO Now
According to the Fantasy Sports & Gaming Association, 59 million sports fans play fantasy sports in just Canada and the U.S. Moreover, the average fantasy sports participant spends more than $650. Furthermore, the legal market is estimated to be worth $5 billion while the illegal fantasy sports market is worth an astounding $150 billion.
Ever since the Supreme Court lifted the federal ban on sports gambling in 2018, the sports gambling industry has exploded as sports betting is legalized state by state. And DraftKings is already ahead of the game, well-positioned to capture a large share of this new market. This makes the DraftKings IPO a very attractive investment opportunity.
Furthermore, the company has added sportsbooks to its list of offerings. DraftKings Sportsbooks currently operate in:
- New Jersey
- New York
- New Hampshire
- West Virginia
Furthermore, DraftKings also operates retail locations in Iowa, New Jersey, New York, and Mississippi.
However, the continued growth of legal sports betting is only one factor. What really has piqued the interest of investors is what the company recently announced.
DraftKings IPO by Acquisition
December 2019 brought the announcement of a business combination agreement; DraftKings will merge with Diamond Eagle Acquisition Corp (Nasdaq: DEAC) as well as SBTech.
Diamond Eagle is a special purpose acquisition company founded by investor Harry Sloan and media executive Jeff Sagansky. The purpose of a special purpose acquisition company is to raise capital with an IPO and then use that capital to acquire an existing company. This time, Diamond Eagle has acquired DraftKings.
“I have been acquainted with Jason Robins for four years, and think of him as a real entrepreneur. I think our investors share my respect for his leadership and vision,” stated Diamond Eagle founding investor Harry E. Sloan.
However, DraftKings isn’t the only company included in the merger. The global leader in omnichannel gaming and sports betting, SBTech, is also included in the deal. SBTech’s goal is to give players constant access to both sports and casino games across every online, mobile and retail channel.”
Jason Robins stated in the DraftKings IPO press release, “Combining DraftKing’s trusted brand, total commitment to customer experience and data science expertise, along with SBTech’s forward-looking and proven tech platform makes a vertically-integrated powerhouse. I look forward to significantly building on our goals of a state-by-state roll-out, as well as creating an entertaining and engaging customer experience for our global sports fans.”
When the merger is finalized, the combined company will have a worth of $3.3 billion with more than $500 million cash on hand. Institutional investors have already pledged $304 million in Class A common stock.
Furthermore, Diamond Eagle will use the DraftKings name and change the name on its stock ticker. However, what the new ticker name will be hasn’t yet been announced.
When Will the DraftKings IPO Happen?
After the merger is complete, DraftKings will be publicly traded. However, an exact date hasn’t been announced yet.
The excitement continues to build for investors who want to get in on the DraftKings IPO. According to Jason Sloan,
“DraftKings is already the top online fantasy sports and betting platform. Combined with the fully integrated SBTech’s innovative product expertise and technology, along with the right capitalization, DraftKings will be in the perfect position to proceed with its ambitious expansion into the U.S. sports gambling market.”
The bottom line is, it seems that DraftKings has all the right ingredients for a very successful IPO.