DraftKings announced that it has begun an underwritten public offering of 32 million Class A common stock shares, the goal of which is to raise as much as $1bn.
The sports betting and daily fantasy sports operator issued an update to investors on Monday, explaining that half the shares will come from the company, while the other half will come from existing shareholders. None of the proceeds of the shareholders’ half of these shares will be going to DraftKings.
The funds that the operator raises go toward general corporate purposes.
DraftKings and its shareholders are also planning to give a 30-day option to underwriters to obtain an extra 4.8 million shares. The funds that the operator raises go toward general corporate purposes.
Goldman Sachs and Credit Suisse Securities (USA) are the joint book-running managers, with no assurances given by DraftKings about if or when this offering may be completed.
Three main priorities
In the preliminary prospectus that was filed with the US Securities and Exchange Commission (SEC), DraftKings outlines its three main priorities going forward.
It aims to consistently invest in its platform and products, to continue its geographic expansion into jurisdictions with newly regulated sports betting, and to enhance its offerings for consumers. It is also still in the process of integrating SBTech, the technology provider that was part of the reverse merger in April.
One of the most notable shareholders to cash out some of his stake, is New England Patriots owner Robert Kraft. The billionaire is selling almost 286,000 shares, representing about 10% of his total stake in the company. SBTech founder Shalom Meckenzie is also selling 8.5 million shares.
Looking to the future
Since DraftKings went public, its shares have been popular among investors. Its third quarter results will be released later this month; the company expects to post a significant increase in year-on-year revenue.
For the quarter ending September 30, it believes that total revenue will be about $133m, an increase of 97% compared to last year’s figure. However, its marketing and sales costs are projected to be around $200m to $210m.
Customer acquisition rates have been better than expected for DraftKings due to people staying at home during the pandemic, leading to better advertising response rates.
total monthly unique players is set to be over one million for the quarter
Sports betting handle has grown by about 355% and its online casino handle by 460% year-on-year. Total monthly unique players is set to be over one million for the quarter, a rise of 64%.
In DraftKings’ long-term vision, earnings projections bypass $1bn. It expects that 65% of the US population will soon be living in states with legal sports betting and 30% in states where online casinos are permitted.
The goal is to obtain a 25% market share for sports betting and 15% for the online casino market.