Instant pain relief
Seeking to stem the flow of an approximate $5bn market cap hemorrhage over the past few weeks, DraftKings is pivoting towards the source of its pain in a move that saw its shares rally.
market cap loss of $9.9bn
DraftKings’ acquisition of Railbird Technologies Inc announced Tuesday confirms the Boston firm’s intention to launch a prediction market product to counter the financial damage inflicted by the likes of Kalshi and Polymarket. Earlier in the day, DraftKings stock was at $33.62, a 37% drop from February 14th’s high of 53.61% and a market cap loss of $9.9bn.
The acquisition of the New York-based firm, along with its Commodity Futures Trading Commission (CFTC)-licensed Railbird Exchange, provided instant relief. Draftkings shares rallied 6% in late trading on Tuesday.
Confidence booster
According to a press release, DraftKings Predictions will launch its eponymous product as a mobile app “in the coming months.” Despite the vague timeline, the news of the Railbird deal has boosted investor confidence and has given DraftKings CEO Jason Robins something positive to say after watching his firm suffer these past weeks.
Robins was bullish in the press release, claiming the acquisition positions DraftKings to dominate the prediction markets vertical. The CEO stated the combination of Railbird’s platform with DraftKings’ scale, brand affinity, and digital expertise “positions us to win in this incremental space.”
The fact that DraftKings is adding a new, regulated business arm to its portfolio in order to claw back market share reflects how fast the US gambling industry can change.
a transformational moment”
Railbird CEO Miles Saffran stated the acquisition represented “a transformational moment” for his firm. Saffran, an ex-analyst with Steve Cohen’s asset management arm Point72, said his firm was “thrilled to be a part of the future of DraftKings.”
Pressure to act
Faced with faltering shareholder confidence, Kalshi and Polymarket’s trading volume rising weekly, and no sign any legal challenges might derail prediction markets, DraftKings has been under pressure to react.
FanDuel is facing the same pressures as DraftKings. While FanDuel inked a deal with a multi-CFTC exchange licensed firm in August, it has yet to launch a prediction market product.
Underdog’s tie-up with Crypto.com in September to offer events markets in-app, meanwhile, made the established daily fantasy brand the first licensed sports gaming firm to launch a hybrid prediction market product.
