Initial questions about a new DraftKings stock offering appear long forgotten as the company announced seven million additional shares becoming available.
That brings the total to 40 million shares at an offering price of $40, including 16 million new shares. The quick math: DraftKings could infuse $640 million in cash to give the company north of $1 billion on hand.
The company announced Tuesday an offer of 14 million new Class A shares and 19 million redistributed Class A shares after the close of markets. Those totals move to 16 million new and 24 million redistributed in the revised offering.
After-hours trading saw DraftKings stock price fall $2.24 to $38.33 on the news then. $DKNG ticked up to $41.55 after the close of trading as of 7:30 p.m. Thursday.
How DraftKings stock offering will work
A number of high-profile sports investors and DraftKings executives will sell shares as part of the offering. None initially appeared to be moving more than 10% of their holding, though that could change with Thursday’s move.
The selling shareholders also increased their option to sell 6 million additional shares in the following 30 days. That figure bumps up more than 20% from Tuesday.
Contractual and regulatory requirements will restrict further sales before October 20, 2020.
The seller list includes:
- New York Knicks and Rangers owner James Dolan (Madison Square Garden)
- DraftKings co-founder Matt Kalish
- New England Patriots owner Robert Kraft (Kraft holdings)
- Dallas Cowboys owner Jerry Jones (Legends Hospitality)
- NHL Enterprises
- DraftKings co-founder Jason Robins
Why sell now?
The redistributed shares essentially amount to early investors in $DKNG cashing out following a wildly successful market debut.
DraftKings stock debuted April 23 on Nasdaq just above $17 per share following a business combination with SBTech and reverse merger to public.
DraftKings stock reached an all-time high of $44.79 in early June despite a nearly complete lack of US sports betting activity. It still enjoys a Buy rating from multiple analysts as the company’s market cap eclipsed $12 billion.
New offering will cause dilution of shares
The 16 million new shares appear targeted for a capital raise by DraftKings. That might ring as excessive given the company’s strong start on Nasdaq, though far less so when considering the fierce competition for US sports betting market share.
Prime competitor Flutter recently tapped more than $1 billion, much of which is marked for US expansion. The global gaming behemoth owns market leader FanDuel, as well as rising force Fox Bet.
The new offering will of course dilute share value for current stockholders. That is because of a decrease in an existing stockholder’s ownership percentage of that company.
