DraftKings To Raise $1 Billion Through Stock Offering; Company Has Record Quarter Despite Poor NFL Results

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DraftKings stock offering

Bad NFL results cost DraftKings around $15 million in Q3 but the company still enjoyed a record quarter, according to preliminary figures filed today.

In a prospectus accompanying a stock offering, DraftKings predicted revenue of $131-$133 million for Q3. DraftKings would raise nearly a billion dollars at its current price.

That’s up 41% year-on-year, but, DraftKings said it would have been $15 million better if NFL results had simply been average. 

Record engagement at DraftKings

Arguably the bigger story was the impact of backloading sports events to Q3.

Online sports betting handle was up 460% compared to last year, including 110% growth in New Jersey sports betting.

Online casino handle was up 335%, with NJ growth of 150%.

Of course, those numbers are impacted by COVID and DraftKings warned they “may not be representative of our performance in other periods.”

The best time to raise cash is when you don’t need to

The preliminary figures were released as part of a new share offering announced today.

DraftKings is offering 32 million shares of its Class A common stock, with sixteen million shares be issued by DraftKings itself and 16 million shares sold by existing stockholders. 

No price was announced, but at a $60 share price, the company would raise $960 million, with selling shareholders raising similar.

Former SBTech owner Shalom McKenzie is among the sellers, planning to offload at least seven million shares worth approximately $420 million.

New England Patriots owner Robert Kraft also sold just under 300,000 shares.

DraftKings stock dipped 5% to $60 on the news in pre-market trading, although it is still up 496% year to date.

What does DraftKings want $1 billion in cash for?

The company said it would use the proceeds for “general corporate purposes.” 

But what does that mean? DraftKings already had a healthy balance sheet, with $1.2 billion in cash as of its Q2 results in August.

However, with the stock price at all-time highs, it makes sense to raise money now. 

The money could fund “opportunistic” M&A, as CEO Jason Robins has suggested previously. Online casino technology or a media brand would be logical M&A targets.

Or the money could just fund marketing and expansion into new states like Illinois.

Marketing push

DraftKings spent $200 to $210 million on sales and marketing expenses in Q3 alone.

That was more than 4x the $46 million spent on “sales and marketing” in Q2. 

The company said it had upped the ante because it was seeing better response rates from customers stuck at home during COVID-19.

“Even with our scaled-up spending on customer acquisition, recent CACs have been better than our expectations,” the company said. 

It said monthly unique players (MUPs) for Q3 topped one million, up 64% year-on-year.

Sports betting is booming

DraftKings is the latest sports betting firm to cash in on lofty valuations.

The DK share sale means US sportsbooks have raised close to $5 billion this year:

What’s more, two more sportsbook brands are likely to get access to the public markets soon. BetRivers parent company Rush Street is going public through a SPAC and William Hill, already public in London, is being bought by Caesars