The Walt Disney Company owns more than 18.2 million shares of DraftKings stock after the operator’s merger with SBTech and listing on Nasdaq last week.
Documents filed Thursday with the Securities and Exchange Commission (SEC) show Disney owns 6% of DraftKings’ stock. The $DKNG share price closed at $19.46 on Thursday, up 6 cents from Wednesday.
That pegs the value of Disney’s investment in DraftKings at more than $364 million. Disney acquired that stake in a massive deal to purchase 21st Century Fox in March 2019.
DraftKings went public with an initial market cap of $6 billion last week. Its share price has fluctuated between roughly $17 and $20 since going on offer.
Disney a ‘passive’ investor
The Schedule 13G filing designates Disney as a “passive investor” under Rule 13d-1(c) of the Securities and Exchange Act of 1934.
That classification potentially helps Disney avoid hefty fees related to additional government disclosures under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act.
The passive designation prevents Disney from taking an active role in the operator’s board or operations. It also means Disney cannot invest in any direct competitors of DraftKings while maintaining passive status.
The filing, therefore, appears to make clear of Disney’s plans for its investment in the near term. When it first took on Fox’s interest last year, industry speculation swirled about whether Disney might attempt to purchase the operator outright.
Tracking the DraftKings investment
Fox invested $160 million in DraftKings in July 2015, at the height of the company’s success in daily fantasy sports.
It wrote down that investment by 60% just months later, citing concerns about the operator’s valuation:
“… based on information concerning DraftKings’ current valuation in a recent financing transaction, the Company determined that a portion of its investment in DraftKings was impaired and recorded a loss of approximately $95 million …”
Fox took its interest shortly after a long-rumored deal between the operator and Disney fell through. That $250 million arrangement fizzled, although DraftKings still inked an exclusive DFS deal with ESPN, which is owned by Disney.
How DraftKings went public
Diamond Eagle Acquisition Corp. paid $2.7 billion in cash and stock for both the sports betting operator and supplier SBTech in a reverse merger. That structure helped DK avoid an IPO.
DraftKings sees the bulk of the deal with $2.055 billion in cash and stock. CEO Jason Robins received Class B shares that give him about 90% of capital stock voting power.
Disney maintains shareholder voting power with its 6% stake. The entertainment giant reportedly is worth around $130 billion and its share price closed at $108.15 on Thursday.
Also listed in the SEC filing are a handful of Walt Disney Corporation subsidiaries:
- TWDC Enterprises 18 Corp.
- Disney Enterprises, Inc.
- TFCF Corporation
- TFCF America, Inc.
- TFCF Sports Enterprises LLC