Investor Alert

April 27, 2020, 3:02 p.m. EDT

Here are 5 things to know about DraftKings, after it went public and fetched a $6 billion market cap

Online gambling is expected to eclipse daily-fantasy roots of DraftKings, which went public through a so-called blank-check company

Watchlist Relevance

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    DraftKings Inc. Cl A (DKNG)

or Cancel Already have a watchlist? Log In

By Max A. Cherney

Getty Images
The DraftKings Inc. chief executive has roughly 90% of the voting rights, resulting in a controlled company.

Online-gambling and fantasy-sports company DraftKings Inc., received a market value of more than $6 billion after going public through a blank-check company merger — a nontraditional route to becoming a public company for a very nontraditional company.

DraftKings /zigman2/quotes/213120645/composite DKNG +1.29%  launched in 2012 with a single, daily fantasy-sports product, which allowed enthusiasts to make bets on players’ performance in a range of sports. Something of a virtual gold rush followed for DraftKings and rival FanDuel. DraftKings gobbled up hundreds of millions in investments and spent big bucks on marketing partnerships with National Football League and others.

In 2018, the business changed when the U.S. Supreme Court struck down the Professional Amateur Sports Protection Act, which prevented states from allowing sports betting, aside from a few exceptions. As a result, DraftKings entered into the sports-betting business and began offering online versions of casino games like slots and roulette in certain states.

Today, DraftKings has three main lines of business: daily fantasy sports, sports betting and online casino gambling. The three segments are legal in different areas, and have differing regulatory burdens as well as margin profiles.

Though the company’s lines of business expanded, DraftKings Chief Financial Officer Jason Park told MarketWatch in a phone interview Friday that the company’s core focus has remained.

“The DNA of the company — that we’re super user-focused, super data-oriented — that core DNA hasn’t changed very much,” he said. “I think if you said: ’What really has changed?’ It’s our future growth profile with all the legalization.”

DraftKings managed to go public on the Nasdaq through a blank-check company, Diamond Eagle Acquisition Corp., which listed in 2019 at $10 a share. After announcing in December that it would merge with DraftKings, shares moved as high as $18.69 as investors waited for the combination to be approved; on its first trading day Friday, DraftKings stock closed up 10.1% at $19.35, a record high that gave the company a value of roughly $6.3 billion, according to FactSet.

Park says that because the company listed through a blank check company, which it announced in December, it effectively avoided the market turmoil that has come with the coronavirus outbreak that has stifled so many other businesses globally. Diamond Eagle — also known as a special purpose acquisition company, or SPAC — raised money in 2019 and signed the acquisition of SB Tech, an online gambling technology business it brought into the company.

“The SPAC was a really elegant way to complete those three things,” Park said.

Here are five things you need to know about DraftKings as it begins to trade, based on public documents filed with its regulators .

How DraftKings makes money

Daily fantasy sports were the company’s first product and was at one time seen as a gold rush by venture capitalists who poured millions into DraftKings on its long road to going public. Revenue from daily fantasy sports is the difference between the entry fees collected and the amounts paid out in prizes and customer incentives.

After the 2018 Supreme Court ruling, DraftKings added sports betting and online casino gambling, which the company combines and calls “iGaming.” For sports betting and online casino gambling, DraftKings’ revenue amounts to the difference in the amount of cash paid out compared with how much players bet.

In the prospectus, the company said that since the late-2018 launch of sports betting and online casino games, that business is growing much faster than the fantasy-sports business — though there are far fewer states where online casino gambling is legal, and that number doesn’t appear to be growing. The company expects them to account for a majority of its revenue in the future.

In addition to its revenue from games, DraftKings also sells ads on its platform. The company also says that it records the various incentives it offers to customers, such as its loyalty program, as reductions to revenue and that such costs are seasonal.

US : U.S.: Nasdaq
$ 36.04
+0.46 +1.29%
Volume: 8.43M
Nov. 26, 2021 1:00p
P/E Ratio
Dividend Yield
Market Cap
$28.81 billion
Rev. per Employee
1 2
This Story has 0 Comments
Be the first to comment
More News In

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.