DraftKings Raises $1 Billion in Common Stock Offering
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On Monday, DraftKings announced that it would be selling 32 million shares of Class A common stock. 16 million would be sold by DraftKings, while DraftKings shareholders would sell the other 16 million.
Both DraftKings and selling stockholders are allowing underwriters 30 days to purchase an additional 4.8 million of Class A common stock. DraftKings is now receiving any proceeds from selling stockholders.
A price was not announced, but some experts believe to going price will be $60, raising $960 million in capital. New England Patriots owner Robert Kraft just sold off 300,000 shared of DraftKings, dropping the price before Monday’s open.
Despite a lackluster third quarter thanks to the NFL costing the sports betting operator $15 million, analysts believe that will generate over $100 million in revenue for the quarter on top of raising an additional $1 billion from selling Class A common stock.
Why the Stock Selloff?
According to the press release, DraftKings states that they are raising $1 billion “for general corporate purposes.”
The funds’ specifics are still up for debate, but DraftKings stock has been hitting all-time highs and is up almost 500% on the year. It makes sense to raise funds, and will most likely use it for expansion into other states.
DraftKings has been making a huge push in the sports betting industry, with almost half of the U.S. states with legalized sports betting. According to reports, DraftKings has spent over $200 million in marketing in the third quarter.
There is definitely a demand for sports betting now that major U.S. sports have returned to action after the COVID-19 shutdown multiple leagues. DraftKings sees it, which is why it is doubling down on marketing and entering other business ventures to grow its brand long-term.
DraftKings’ online sports betting handle is up over 450% this year, and its online casino is up 335%. New Jersey has also seen booming growth being up over 100% and 150% in sports betting and online casino gaming.
The demand is there, and DraftKings want to make sure they capitalize on it while the market booms.
Sports Betting Growth in the U.S.
DraftKings has seen great results in the second half of 2020, but the whole betting market is up overall. Not only is DraftKings raising $1 billion, but Penn National is doing the same thing to help launch Barstool Sportsbook in multiple states. FanDuel has also raised $1 billion through Flutter as well.
PointsBet is raising $250 million of its own through a share offering, along with MRGM Resorts helped Roar Digitial with $250 million as they operate MGM sportsbooks.
Caesar’s Entertainment acquired William Hill for $3.7 billion last week, and an attempt to grow its market share in the U.S. sports betting market. William Hill already operates Caesar’s sportsbooks and will grow under the company now that they have been bought out.
Now is the time to get into the sports betting market. Demand is huge after the long layoff of sports, and now more states are looking to legalize sports betting, only to have the industry grow even more.
This is becoming a good problem for sportsbooks as they need to raise money to make the growth work. They understand what sports betting can do in the long-term.
