Popular sports fantasy and betting website DraftKings launched its IPO today despite the fact that live sports are more of a fantasy than ever as major leagues around the world are sidelined until further notice during the novel coronavirus pandemic.
DraftKings Inc.’s (DKNG) initial public offering was made official Thursday when shareholders of Diamond Eagle Acquisition, a blank-check company that mostly aims to acquire or merge with other operations, approved a merger, according to CBS News.
The deal was announced in December, and it includes $304 million in institutional investments along with a trust account in Diamond Eagle’s name with as much as $400 million. DraftKings estimates the merged company will have $500 million in unrestricted cash.
Shares of DraftKings will trade on the Nasdaq Global Select Market, and the company’s co-founder and CEO Jason Robins has some hope in the long-term outlook for sports betting.
Robins even sees a chance for a surge of activity on the site once leagues get back in action because fans around the world have been craving live sports amid the COVID-19 lockdown.
“I hope and believe that sports will come back and people will continue to have a strong appetite for sports,” Robins said in an interview with The Associated Press. “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.”
DraftKings IPO: Shares Spike, Then Pare Gains
DraftKings’ IPO launched with some enthusiasm with shares up around 20% at the opening bell, but it lost some steam and was trading up 7%, or $18.70 per share, by 10:33 a.m. on the East Coast.
Robins thinks states could turn to sports gambling as a means of revenue. The Supreme Court made sports betting federally legal in May 2018, and since then 14 states have followed suit. DraftKings has sportsbooks in eight of those states.
The company should not have any trouble operating while states continue lockdown measures. Robins mentioned that most of the 950 employees are now working from home.
“We don’t have a big brick and mortar presence, where a lot of our employees are literally not able to go into work,” he said.
DraftKings’ IPO may be the worst-timed launch ever with the main driver of its revenue stalled for the foreseeable future. It will be interesting to see if it can garner enough investor support and become a winner once live sports come back in full force.