When it comes to betting big on anything, no sportsbook or casino comes close to the action on Wall Street.
And now, one of the market leaders for legalized sports betting in the United States is planning to let you bet on their success next year.
The Boston-based DraftKings announced earlier this week plans to merge with two other companies and become publicly traded on the Nasdaq Stock Market in 2020.
DraftKings, a US sports betting, daily fantasy sports, and online casino operator, stated on Monday it will go public after completing a merger with SBTech, an international gambling tech firm, and Diamond Eagle Acquisition, a special purpose acquisition company, in the first half of 2020.
“The combination of DraftKings’ leading 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,” DraftKings co-founder and CEO Jason Robins said in a statement.
The new three-headed corporate entity will reportedly take the place of Diamond Eagle’s status on the exchange under a new stock ticker, which is expected to use the well-known DraftKings brand name.
As a result of assuming Diamond Eagle’s place, Draftkings will not have a traditional initial public offering (IPO) since it’s merging via a special purpose acquisition process.
According to MarketWatch, Draftkings’ decision to go public makes history, becoming the first—and currently only—“publicly traded pure-play sports betting and online gaming company in the US.”
DraftKings Inc.—which will house the combined three companies once the merger is completed—will reincorporate in Nevada and is expected to have a market cap valuation of $3.3 billion with over $500 million in unrestricted cash on hand once the deal is finalized.
Capital Research and Management, Wellington Management, Franklin Templeton, and other fund managers and institutional investors are committing a $304 million investment in the newly established company.
Robins said the merger allows DraftKings to accomplish three primary goals for his company: 1) combine with gaming provider SBTech, 2) raise money to help fuel growth, and 3) and go public on the stock market.
“A lot of companies wait to go public until they’ve hit the end of what is their very obvious growth phase when they’re already at their scale level,” Robins said. “We’re going public in the early days of what we hope will be a very expansive and large market in the U.S. that develops over the coming years, so it gives public shareholders a real opportunity to ride that growth.“
Following the US Supreme Court PASPA repeal in May 2018, which lifted the federal prohibition on sports betting and allowed states to consider passing legislation, DraftKings has become one of the biggest winners of the newly legalized market.
Currently, 13 states offer legal sports betting in one form or another, and seven more states, including Washington DC, have enacted laws but are pending launch for their sportsbooks.
DraftKings only operates in a handful of states with either legalized online or in-person sports wagering but has a stronghold in the daily fantasy sports (DFS) market. The company’s DFS contests are available in 43 states and eight countries outside the US and have only one true competitor in FanDuel in terms of market share.
As a result, DraftKings, which was founded back in 2012, said it currently has a 30% share of the total online gambling market despite not pulling in sizeable profits at the moment.
Investing in DraftKings stock next year is similar to betting on the New England Patriots’ odds in preseason Super Bowl futures—it’s not a “safe bet,” but it’s a good bet and one of the best you can place based on historical trends.
And growth is coming sooner than expected, according to the DraftKings’ projections. Robins said the company forecasts $540 million in revenue for the 2020 fiscal year and $700 million in revenue in 2021
US gambling industry analysts predict more than 40 states will offer licensed and regulated sportsbooks by 2024, and with DraftKings going public next year, you can bet they’ll be well-positioned to capitalize on a market that could be worth as much as $150 billion five years from now.
