Fantasy Sports Front-Runner DraftKings Has Unique IPO Process Ahead

DraftKings is a sports betting outfitter with a 60% share of the market. And analysts estimate it to be worth billions down the road. As more states legalize sports betting, the market widens for DraftKings’ taking. Now, the company looks to expand operations throughout the U.S. And the best way to do that is offering a DraftKings IPO.

The company has announced that its going public. With this news, investors are anxious to get a piece of the action. But if investors are expecting a traditional IPO process, they’re in for a surprise.

DraftKings IPO: The Business
Fantasy sports has been a popular part of sports cultures for decades. The first reported fantasy sport was in the late 1950s. It was created by Wilfred “Bill” Winkenbach, an Oakland businessman. In fantasy sports, participants build imaginary teams with real players. The statistics of each player on the team determines the fantasy team’s score.

Fast forward to 2012 and friends Jason Robins, Paul Liberman, and Matt Kalish created DraftKings. They decided daily fantasy sports could be better than season-long. Within a few years, it was an international brand. Currently, DraftKings offers experiences across 13 sports, including Major League Baseball, the National Hockey League, NASCAR and Ultimate Fighting Championship. The company operates in nine U.S. states and eight countries.

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DraftKings offers multiple daily contests where users can win cash and prizes. There are free and beginner contests for those just starting out. The company also offers leagues so users can play privately with friends.

Why DraftKings is Going Public Now
According to the Fantasy Sports & Gaming Association, 59 million people play fantasy sports in the U.S. and Canada alone. The average participant spends $653. CNBC estimates the legal market to be worth $5 billion and the illegal market around $150 billion.

In 2018, the Supreme Court ruled to lift the federal ban on sports gambling. Since then, the sport gambling industry is growing as it’s legalized state by state. And DraftKings could capture a large share of the new market, making the DraftKings IPO a valuable investment opportunity.

The company has added gambling bookmaker to its list of roles. DraftKings Sportsbooks operates in:

  • Colorado
  • Indiana
  • Iowa
  • Mississippi
  • New Hampshire
  • New Jersey
  • New York
  • Pennsylvania
  • West Virginia

There are retail locations in Iowa, Mississippi, New Jersey and New York.

However, the booming market growth is only one factor. What investors really need to pay attention to is what the company announced…

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DraftKings IPO by Acquisition
In December 2019, DraftKings announced a business combination agreement in a press release. The company will merge with Diamond Eagle Acquisition Corp (Nasdaq: DEAC) and SBTech.

Diamond Eagle is a special purpose acquisition company (SPAC). Media executive Jeff Sagansky and investor Harry Sloan founded the company. The purpose of a SPAC is to raise capital with an IPO and then use the funds to acquire an existing company. In this case, that company is DraftKings.

“I have known Jason Robins for four years, and consider him a true entrepreneur. I believe our investors share my utmost respect for his vision and leadership,” Diamond Eagle founding investor Harry E. Sloan shared.

But DraftKings isn’t coming into the merger alone. SBTech is the global leader in omni-channel sports betting and gaming. The company aims to “provide players with constant access to sports and casino products across all online, mobile and retail channels.”

In the DraftKings IPO press release, CEO Jason Robins said…

“The combination of DraftKing’s leaded and trusted brand, deep focus on customer experience and data science expertise and SBTech’s highly innovative and proven technology platform creates a vertically-integrated powerhouse. I look forward to building significantly upon our goals of continuing our state-by-state rollout and creating the most entertaining and engaging customer experiences for sports fans globally.”

At the end of the merger, the combined company will be worth $3.3 billion with over $500 million cash on the balance sheet. Institutional investors have already committed to $304 million in Class A common stock.

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Diamond Eagle will take the DraftKings name and change its stock ticker. What the new ticker will be, however, hasn’t been announced.

When Will DraftKings IPO?
DraftKings will be publicly traded after the merger is completed. But the exact date hasn’t been made public yet.

There’s a lot of excitement investors want to get in on. According to Sloan…

“DraftKings is already a premier online fantasy sports and betting platform. With the full integration of SBTech’s technology and innovative product expertise coupled with the right capitalization, DraftKings will be in a great position to continue its ambitious expansion plans in the United States.”

It seems like there are all the right ingredients for a successful DraftKings IPO.

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