Does DKNG mean anything to you? It should because it is DraftKings new Nasdaq Stock Exchange officially listed ticker symbol as they went public last Friday, April 24 at a valuation of more than $6 billion. The digital sports entertainment company was founded in 2012 as a daily fantasy sports play based on sports performance. Today, they are perhaps the leading online sport betting, fantasy sports and online gaming operator in the United States. You might be asking why they went public at a time when live sports events are almost nonexistent because of the coronavirus shutdown but the answer is easy to understand. The legalization of sports betting in 2018 by the U.S. Supreme Court opened up a pandoras box for each state to decide whether they should allow gambling on sporting events to be legal and as a result, regulate and tax the companies in the industry. So, in stepped DKNG and business rival FanDuel to rake in the juice which will begin back up with perhaps a shortened Major League Baseball season or the beginning of the NFL, the ladder one of DraftKings first big marketing partner spends. The thing is, without technology, this reverse merger would never have happened because as co-founders Jason Robins, Paul Liberman and Matt Kalish told me and the rest of their valued customers in an e-mail blast about the announcement, the blank-check, business company merger between Nasdaq listed Diamond Eagle Acquisition Corporation’s (DEAC) purchase of both DraftKings for $2.055 billion and the acquisition of SBTech ($645 million) for their international turnkey betting and gaming tech, in a cash and stock trade for a sum total of $2.7 billion, enabled DKNG to assume full control of their backend technologies and trading platform. The Sports Techie community blog has DKNG “skin-in-the-game” as a long-time player, yet I rely on my brother, Ricky Roble, for advice and knowledge about the stock market, odds and horse racing respectively as he truly understands all three spaces. DEAC was a Special Purpose Acquisition Company (SPAC) in this pure sports tech deal that spans 15 professional sports and 8 countries while focused on daily fantasy sports, sports betting and online casino gambling business.
“Today marks another milestone for DraftKings and the future of digital sports entertainment and gaming in America,” said Robins, CEO of DraftKings. “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. I am confident that the new DraftKings will progress our goal of offering the best, most innovative sports and gaming products to our customers.”
Building An Empire
What started out in Paul’s spare bedroom in Watertown, Massachusetts, has grown to become a $6B+ sports and gaming products empire enjoyed by their employees, fans, partners, and investors, alike. For the record, they gave their startup pitch to over 40 investors before landing the seed funding required to make this so.
Daily fantasy sports soon took off allowing DraftKings to sign the first-ever DFS league partnership with MLB in 2013.
DraftKings became essentially lobbyists in order to convince decision-makers of law across America to break the near monopolistic hold Las Vegas and Nevada had on legal sports betting in America. The company continued to influence regulators when former New Jersey Governor Christie challenged the existing Professional Amateur Sports Protection Act preventing states to offer sports betting. DraftKings was ready for the societal change offering sports betting and online casino games in states that were ready to capitalize on the decision to overturn PASPA like N.J, Delaware and Mississippi.
The new combination of companies allows DKNG to be know as the only vertically integrated pure-play sports betting and online gaming company in the U.S. making the American fan their digital bread and butter. They did it via a SPAC initial public offering (IPO) listing according to Nasdaq as a faster means to raise capital rather than through privatized fundraising. The management teams experience and the company track record are important factors for a SPAC. As of March 2020, 81% of SPACs listed on Nasdaq have raised over $31.6 billion. DKNG just joined this exclusive investment club.
According to SI, the established valuation of just over $6 billion was made on a smidge under $400 million in revenue and no profits (DraftKings reported +/- $140 million in ’19 losses). With estimates of a $20 billion domestic sports betting market in the next 5-years, DKNG expects to corner the market by using the SPAC IPO resources for new products and breakthrough sports technology innovations.
Their Tech For Heroes initiative provides education and mentorship for veterans, breast cancer research and natural disaster aid that includes donating $500,000 to the United Way as a COVID-19 local community response. Every person that shares a photo over social media using hashtag #DKRally of someone sporting a rally cap results in the addition of $1 to the charitable effort.
Sports Techie, times are tough right now worldwide. But when the going gets tough, the tough get going. To me, this sums up DraftKings. They started off with an American Dream, then they bootstrapped it, built some tech, and got going all the way to becoming DKNG.
The DraftKings Inc Class A Common Stock price today was $19.40, up 6.36%. Be forewarned, chief executive Robins owns nearly 90% of the voting rights, meaning they are a controlled company. Not sure what that exactly means but my brother will tell me tomorrow.
Congrats to DKNG, may you continue to provide safe, fun and profitable for some, sports betting, fantasy sports and online casino gaming.
Remember, do not play what you cannot afford to lose.
See you later sportstechie in Seattle, Atlanta and around the world!
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