DraftKings is raising a $150-$200 million funding round to complete its pivot from a DFS company to a legalized sports betting business (with web-based and mobile offerings). Earlier this month, the company announced it had partnered with Resorts Atlantic City (land-based casino partner required) and formally applied for a New Jersey State Gaming License, so that it could take sports bets within the state. No information pertaining to valuation has been disclosed.
Howie Long-Short: DraftKings is reportedly telling investors that it’s expecting DFS to continue driving corporate profits for “years to come” as nationwide legalization will be a slow process. I give the company points for honesty, but that’s not news that will excite me as a prospective investor. The company lost $92 million on $160 million in revenue in ’16, so it’s reasonable to assume it wasn’t profitable in ’17 on $192 million; and with DFS set to begin losing market share to legalized sports betting (see: Yahoo! DFS, FanDuel in Europe) one can’t assume 2018 will be any better. The announcement of this round would seem to imply the company currently lacks the runway to complete a pivot that it acknowledges will take time.
Axios has also reported that Platinum Eagle Acquisition Corp. (EAGLU) has expressed interest in a reverse merger; an expedient and cost effective way for a private company to trade on a public exchange. No details have been released relating to the equity percentage at which EAGLU would acquire the company or the valuation DraftKings holds; FanDuel calculated its fully diluted value to be $1.2 billion in 2017, though its user base is smaller (6 million versus 10 million).
The Legal Sports Report has reported that Kindred Group (STO: KIND-SDB) is also kicking the tires on a potential DraftKings acquisition. That news is interesting as KIND-SDB announced back in May intentions to enter the U.S. market and it’s believed that a subsidiary (Kambi Group) is working with DraftKings to develop a mobile sports betting product. The European online gaming and sports betting company, best known for subsidiaries Unibet and 32Red, did just shy of $1 billion in revenue last year.
Fan Marino: Penn National Gaming (PENN) is another company that has an opportunity to get in on New Jersey’s sports betting gold rush. The company, along with Greenwood Racing, owns a proposed OTB site in Cherry Hill that could qualify for a sportsbook under a bylaw that covers “former racetracks”. The joint venture also owns the Freehold Racetrack.
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