DraftKings is finally a publicly-traded company. The Boston-based company hit the Nasdaq on April 24 for the first time.
According to Jason Robins, the co-founder and CEO of DraftKings, the journey to get to this point makes the accomplishment all the more meaningful.
“It’s a big milestone for us, and I think in many way some of the things we went through, the different ups and downs and curveballs, make it that much more special.”
It’s a strange time to be in the sports business since events around the country have been shut down n the wake of COVID-19. Despite the uncertainty, DraftKings’ first day on the market was a successful one.
Details of the DraftKings merger with SBTech
DraftKings merged with SBTech in a $3.3 billion deal. SBTech provides the online platform for gambling sites throughout the US and Europe. For example, one of those sites is Churchill Downs’s BetAmerica, which is one of Indiana’s six online sportsbooks.
Technically, both companies were acquired by Diamond Eagle Acquisition Corporation.
By combining both companies, DEAC creates an internet gaming titan.
DraftKings relies on the US market and SBTech has more of a European presence. The duo can cover more ground together than they can separately.
Things were originally going to come together a bit earlier until a cyberattack on SBTech created a speed bump for the process.
The dust hasn’t completely settled yet. SBTech is still working to settle loss claims with its partners that were affected by the attack.
DEAC had to set aside an extra $30 million to cover those losses. If that isn’t enough money, the group has an extra $25 million cash escrow and $45 million in locked-up shares it can use.
Diamond Eagle Acquisition Corp. is playing the long game
This merger is all about the future.
For now, DraftKings isn’t exactly making a river of cash. In fact, the company lost over $100 million in 2019 alone.
That’s basically because expansion is an expensive process.
With new states opening up for sports betting every year, DraftKings has to spend money to make money. That racks up costs pretty quickly, especially when the company has to bump elbows with FanDuel and other competitors to grab a meaningful share of those new markets.
That spending may come up front, but eventually, it’ll lead to solid cash flow. At least, that’s the plan.
However, daily fantasy and its sportsbook are only part of the game for DraftKings.
A big chunk of that eventual profit could come from the online casino side of things.
Right now, there just aren’t a whole lot of states that have legal online casinos. But the casino business is a profitable one, and DraftKings will certainly be jumping on the opportunity as more states join the party.
DEAC spent a fortune acquiring DraftKings and SBTech. That merger may have been an expensive one at face value, but if it’s able to stay a major player in the online gaming world, the deal will be well worth the money down the line.