DraftKings Goes Public After Three-Way Merger Approved

  • Diamond Eagle Acquisition Company shareholders voted in favor of the merger on Thursday
  • DraftKings will be listed on the Nasdaq exchange under the ticker symbol ‘DKNG’
  • Jason Robins happy DraftKings used a special-purpose acquisition company rather than an IPO
  • Company is feeling the effects of the pandemic, but boasts $500m in cash on its balance sheet
Nasdaq written on a large screen
DraftKings goes public on Wall Street Friday after its three-way merger with the Diamond Eagle Acquisition Corporation and SBTech was approved by DEAC shareholders. [Image: Shutterstock.com]

Multibillion-dollar merger complete

DraftKings officially completed its multibillion-dollar merger with the Diamond Eagle Acquisition Corporation (DEAC) and SBTech on Thursday after DEAC shareholders voted in favor of merging the three companies into a single entity.

Now that the merger has been completed, DraftKings will be listed on the Nasdaq exchange under the ticker symbol ‘DKNG’. The new company has been valued at $3.3bn. There is no need for DraftKings to have an initial public offering (IPO) before allowing public trading because DEAC is a special-purpose acquisition company (SPAC) that is already publicly traded.

DraftKings will be listed on the Nasdaq exchange under the ticker symbol ‘DKNG’

DraftKings cofounder and CEO Jason Robins will be the chairman and CEO of the unified company. Speaking about DraftKings going public, he said: “It’s a big milestone for us, and I think in many ways some of the things we went through, the different ups and downs and curveballs, make it that much more special.”

SPAC decision taken for added protection

Despite the ongoing coronavirus pandemic, Robins was committed to seeing the company go public. While there will not be much fanfare that is common with IPOs, DraftKings saw the use of a SPAC structure as offering a lot more protection against adverse market conditions. This decision was taken toward the end of 2019.

Robins also pointed toward a number of high-profile IPOs in 2019 that did not perform overly well, including Slack, Lyft, and Uber. Despite the current environment affecting the DraftKings sports offering due to global cancellations, the company has plenty of cash to get it through the crisis. 

The DEAC raised $400m when it went public in May. This sum has now been added to DraftKings’ balance sheet. In total, the company has about $500m in cash reserves.

Big plans for the future

Robins did note that it’s a strange time to be in the sports betting and fantasy sports space. However, he believes that this will only be a temporary blip. He is confident that the company’s customers will be as eager as ever once sports return. 

Speaking about the seasonal nature of the business in normal times, Robins said: “We always have people deactivate at the end of the NFL season, reactivate at the start of the season, so there’s always a seasonality to it anyway.”

There are plans for major sports leagues to move their seasons to the fall. This could see NHL, MLB, MLS, NFL, and PGA host major events in September. This would pose operational challenges for the company.

Robins is also optimistic that more states will legalize sports betting in the future

Robins said this would require server capacity to be increased and additional support staff would be needed. Robins is also optimistic that more states will legalize sports betting in the future. He believes these states may see tax revenue as being an easy way to boost struggling finances. 

Overcoming obstacles before completion

With the ongoing pandemic, some industry experts had doubted whether or not DraftKings would still go public in April

The three-way merger also hit a stumbling block when SBTech was subject to a cyberattack a few weeks ago. This let to SBTech’s servers being shut down for almost a week. As a result, the company’s 50+ global online gambling partners experienced outages. 

This incident resulted in the DEAC telling SBTech to set aside $30m to cover any compensation claims stemming from these outages. The incident also delayed the DEAC shareholder meeting that was originally scheduled to take place on April 9 to discuss this merger.