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DraftKings Share Price Jumps 10% After Going Public Amid Sports Hiatus
By Jeff Osienya Apr 27, 2020 IndustrySports betting goliath, DraftKings goes public after finally getting the green light from shareholders. The new management is optimistic about a brighter future beyond the current pandemic.DraftKings, a celebrated sports betting giant has finally made its stock market debut on Wall Street after a reverse merger acquisition with SBTech against a shaky backdrop of sports hiatus. Either way, this risky move appears to have paid off as the shares of the Boston-based sports brand rose 10.4% after day one of trading, giving the new company a market value of $3.3 billion
After lengthy discussions that have been going on for months now, the merger was approved by Diamond Eagle Acquisition Corp (DEAC) shareholders on Thursday, subsequently going public the following day. The DraftKings stock opened at $17.53 on Friday on the Nasdaq under the DKNG ticker symbol, and by close of business, the share price had jumped to $19.45.
The Structure of the DraftKings Deal
From this reverse merger deal, Diamond Eagle, the special purpose acquisition company steered by Jeff Sagansky and Harry Sloan will pay $2.7 billion in both cash and stock for the two parties; DraftKings and SBTech.
$2.055 billion in stock and cash will go to DraftKings in this deal while SBTech will receive the remaining $645 million in stock and cash as well. DEAC’s cash and private Class A stock will fund the cash considerations for this transaction. By 15th April, the private stock placements were valued at $307 million; a $10 price per share.
However, since this acquisition was only a route for listing the company publicly, the company’s ownership or direction will remain the same. Jason Robins, the CEO of DraftKings will receive Class B shares that will earn him roughly 90% of the voting power of capital stock.
Even so, it is crucial to understand that shareholder voting isn’t the final step in this process. The actual combination of the business will still have to be finished, but there’s no timeline for that as of now.
Currently, DraftKings employs about 2,300 employees across the globe and their global headquarters will remain in Boston, as well as its other bases of operation in the USA in San Francisco, New York, Las Vegas, and Hoboken. Thanks to this newly found arrangement, the company will also have offices in Tel Aviv, Sofia, Plovdiv, and Kyiv out of the US, on top of their new Dublin office.
Harry was the mastermind behind this DraftKings-SBTech reverse merger, and to date, he has been the brains of six other acquisition vehicles with his partner Jeff since 2011. In this newfangled venture, Jason will serve as the chairman, and Harry will be his second in command as vice-chairman.
A Look into the Future of DraftKings After Going Public
While stock prices made gains on the market, Diamond Eagle isn’t exactly taking over a cash-cow, at least not yet. Despite a 43% rise in revenue to $323.4 million last year, DraftKings parted with over $142 million in losses. However, at that time the company indicated that their losses were a consequence of launching in three new states in the US and non-stop platform development.
SBTech, on the other hand, was a headache for DraftKings especially after they suffered a cyberattack blow for a few days last month. SBTech’s woes, in the end, cost them as they had to sweeten the deal for DraftKings before acquisition by setting up a rainy-day fund that would deal with the aftermath of this attack.
But then, even with the murky history, both the chair and vice-chair of the new formation are optimistic. In fact, on Friday, Harry released a statement indicating that while the current sports shutdown may point to uncertainty, there’s a $500 million unrestricted cash reserve at DraftKings’s disposal to fund operations. This kitty should be more than enough for them until sporting normalcy returns.
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