IPO

DraftKings Trading Debut: Let The (e)Games Begin

DraftKings Trading Debut: Let The (e)Games Begin

There are disruptors who come to market and list their shares publicly.

And then there are disruptors who come to market and list publicly – right as their targeted markets are themselves disrupted, at least temporarily.

So seemed the case on Friday (April 24), when DraftKings came public and finished the trading day up nearly 11 percent to $19.35.

In terms of the mechanics, the sports betting company has come public through a merger with Diamond Eagle Acquisition Corp. and SBTech, trading without having to effect a direct listing or initial public offering (IPO).

Beyond the mechanics, one asks: Why now, and what’s next?

After all, the sports world has been hit hard by the coronavirus – in fact, live sports are nowhere to be seen. The absence of sports events on which to bet has prompted a whole-hearted embrace of fantasy sports or eSports, where competitions are waged with the help of video games.

We’ve seen any number of “busted IPOs” through the past few quarters, where companies promised to disrupt, say, food delivery or ride-hailing. And in some respects, they’ve delivered on their promises (a la Uber or Slack). The fact that DraftKings came to market and shares were bid up (albeit with some help from a rising market, perhaps) suggests investors are looking toward a sea change in sports.

As reported by the Associated Press, DraftKings CEO Jason Robins said the long-term outlook for sports gambling is strong.

''I hope and believe that sports will come back and people will continue to have a strong appetite for sports,'' Robins told the AP. ''If there is a trend away from being outdoors and going to the public places, you could actually see an increase in sports viewership once traditional sports are being played again. You could also see an increase in online activity.''

The gates are open for states to embrace sports gambling as a source of revenue, as 21 states and the District of Columbia have legalized sports gambling. As noted in this space back in January, eSports winners could conceivably pay more of their winnings to state coffers in the form of taxes.

In the meantime, pent-up demand may indeed be springloading into a fall that will see, perhaps, the return of the NFL and baseball, along with recently reshuffled events such as the Masters (golf).

Gil Fried, professor and chair at the University of New Haven’s sports management program, noted to Webster that even when sports do return to the corporeal world, social distancing may mean that in an arena, there could be a loss of 70 percent of seating capacity. All those tickets not being sold will add up to a lot of money.

In the meantime, as reported in Legal Sports Report, total sports betting from June 2018 to the current date amounted to more than $20 billion wagered over the period.

Not exactly chump change – and drilling down into eSports, as CNN reported, relaying data from Stream Hatchet, eSports experienced a 37 percent increase in the average number of viewers per tournament last quarter (the first quarter of this year), compared to the same period last year. That growth rate may accelerate moving forward as life becomes lived ever more digitally.

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