DraftKings surges up to 16% in public market debut
We’ll send you a myFT Daily Digest email rounding up the latest IPOs news every morning.
The sports betting site DraftKings rose as much as 16 per cent in early trading following the complex merger deal that has made it a public company — even as coronavirus suspends the live sporting events that provide much of its revenues.
DraftKings is the latest group to go public through special-purpose acquisition companies, or Spacs, which raise money to buy a business and list its shares while avoiding the usual initial public offering process.
Shareholders in Nasdaq-listed Diamond Eagle Acquisition Corp approved the merger on Thursday, giving the new company a market capitalisation of about $3.3bn. The deal also combined DraftKings with SBTech, an Isle of Man-based gambling software provider.
The listing comes as sports leagues including the National Basketball Association and the National Hockey League suspend play, depriving DraftKings users of betting opportunities.
In an investment prospectus, DraftKings said it was working to develop betting products tied to political events and esports games such as eNascar and League of Legends, which are conducted over the internet.
The company said it had drawn down all of a $50m revolving credit facility “in order to provide financial flexibility at a moment when there were many uncertainties from the impact of Covid-19”.
“Despite the coronavirus, the core investment thesis is still intact, and I think we’re seeing that investors are optimistic about that,” said Matthew Kennedy, senior IPO market strategist at Renaissance Capital.
DraftKings’ history has been marked by regulatory scrutiny. In 2017, the Federal Trade Commission sued to block a proposed merger with rival FanDuel, which was eventually scrapped.
The company said in the prospectus that it was “highly focused on our responsibility as stewards of this new era in real-money gaming”.
Investors bid the company’s shares higher despite a difficult run for lossmaking consumer groups backed by venture capital.
DraftKings reported net losses of $142.7m last year on revenues of $323.4m, widening from losses of $76.2m in 2018.
The company also employs a dual-class structure, with chief executive Jason Robins controlling 90 per cent of the company’s voting power through special shares carrying 10 votes each.
DraftKings raised more than $300m from investors including Wellington Management and Franklin Templeton as part of the transaction, in addition to $400m from the Spac.
Get alerts on IPOs when a new story is published