Fertitta Stands By DraftKings Deal, Says Stock Could Get To $100

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The DraftKings acquisition of Golden Nugget Online Gaming (GNOG) is still on track despite recent delays, according to GNOG chairman Tilman Fertitta.

The transaction was first announced in August last year, and one deadline to get it closed has already passed. Fertitta appeared on CNBC Wednesday and was asked whether the deal would close by the latest May 31 deadline.

Fertitta suggested the deal was still on, though he did not commit to a specific timeline.  He also admitted the all-stock transaction was no longer worth $1.5 billion.

The maths of DraftKings deal

Under the terms of the deal, GNOG shareholders would receive 0.365 shares of $DKNG stock for each share of GNOG.

When DraftKings was trading at $52 a share, as it was last August, those shares were worth $1.5 billion. However, at the current $13.50 a share, the compensation is potentially worth around $365 million.

Regardless, Fertitta said the deal was still going ahead because GNOG’s value dropped commensurately.

“It’s not just DraftKings,” Fertitta said. “Look at every other online gaming company, it’s universal. GNOG would likely be trading like that also.”

$DKNG to the moon?

Fertitta remains bullish on the long-term prospects of the DKNG stock.

“I look at [DraftKings] as a long term hold,” Fertitta said. “I will be one of the largest shareholders of DraftKings. It is a tech company. You have to remember that. It is technology. You’re going to look up in a few years and it will be like Amazon or Tesla or one of these other tech stocks, and it will be $50 or $100. 

“When they turn the corner like all tech companies and become profitable, they become really profitable. I saw that for myself running GNOG.”

Fertitta added with a smile: “I love that they will be funding the losses for the next few years.”

Fertitta stays consistent

Feritta’s rhetoric is similar to when the deal was first announced. At the time, he described DraftKings as the “Coca-Cola of the space.”

“I wanted only stock,” Fertitta said. “I wanted to ride this thing all the way up with these guys. This is the best management team in the space.”

Fertitta owns approximately 46% of GNOG and agreed to hold his DraftKings stock shares for at least a year.

Deadline approaching

If the deal does not complete by May 31, either party can choose to terminate the merger agreement. There is a potential termination fee of $55 million if the deal is terminated because of a “material breach of obligations.”

DraftKings had not responded to an LSR question about the reasons for the delay at the time of writing.

Why is DraftKings buying GNOG?

DraftKings said last year the acquisition would help it reach iGaming customers who do not necessarily bet on sports.

“We are very good at cross-selling sports customers into iGaming, but our database is mainly male and focused on sports,” DraftKings CEO Jason Robins said. “GNOG’s database is nearly 50/50 male to female and more of that casino clientele.”

DraftKings will retain the Golden Nugget online casino brand and run a multi-brand strategy.

Golden Nugget is already running on the DraftKings Sportsbook platform for Arizona sports betting.