DraftKings filed documents with the Securities and Exchange Commission on Monday, with the online sports betting titan announcing an equity offering of 32 million Class A shares.
The stock closed at an all-time high of $63.78 on Friday, and the S-1 filing showed DraftKings offering a share price of $56.12 on 16 million shares with the goal of raising slightly more than $1 billion. Its market value at Friday’s close was approximately $22 billion, ranking second behind only Las Vegas Sands among U.S.-based gambling companies.
Certain stockholders will sell an additional 16 million shares and allow underwriters a 30-day option to purchase up to 4.8 million additional shares. There was some selling during trading Monday with the stock dipping as low as $58.60 and then hovering around $60 as of 12:30 p.m. ET.
DraftKings was selling at $10.68 on the first trading day of 2020 and closed at $11.17 on March 12 when the COVID-19 pandemic was beginning to shutter the sports industry. It is the second equity stock offering by DraftKings this year, having offered 40 million shares in June at $40.
So who’s selling?
Shalom McKenzie — the founder of SBTech — will be the largest seller of current shareholder stock by offloading slightly more than 8.5 million shares.
Ted Leonsis — a majority owner of Monumental Sports & Entertainment, which owns the NBA’s Washington Wizards and NHL’s Washington Capitals — is part of the venture capital firm Revolution, and its fund is selling nearly 28% of its stake in DraftKings, which amounts to nearly 1.9 million shares.
New England Patriots owner Robert Kraft is selling 285,704 shares, which is slightly more than 10% of his holdings in the company.
Revenue numbers in line despite NFL sports betting hit
In the S-1 filing, DraftKings stated it did not finalize its third-quarter numbers but expected to report revenue “between $131 million and $133 million” for the three months ended Sept. 30. That is a 97% increase year over year for the third quarter and a 41% pro forma increase from the same quarter of last year.
DraftKings also noted a $15 million loss in revenue due to “atypical hold rates from NFL wagering” based on using a historical average hold of 6.5% for online sports wagering. Overall, though, DraftKings noted its online sports betting handle skyrocketed 460% compared to the third quarter of 2019 and 110% in New Jersey alone for the same time period.
Part of that can be attributed to the “unique sports calendar, with overlapping seasons for all four major U.S. sports … that has also favorably impacted our handle in a manner that may not be representative of our performance in other periods.”
The Garden State also proved to be a driver of substantial increases in iGaming, with DraftKings reporting 150% growth in handle there for the third quarter compared to 2019 and 335% overall.
Advertising dollars looks to be money well spent
DraftKings expected its “sales and marketing expense” to be between $200-$210 million for the quarter, which it attributes partly to people spending more time at home due to COVID-19. Some of that marketing comes in the way of offering free bets as it expands into states that have recently added sports betting, most notably Illinois.
The increased cost, though, did provide a return as it projected to have approximately 1,020,000 “monthly unique payers” (MUPs), which would be a 64% increase year over year for the third quarter.
DraftKings pointed out that in the first six months of 2020, it had an average of 507,628 MUPs, who generated an average revenue of $47 for $159.5 million. While the average of MUPs dropped 5.5% compared to the same period in 2019, the revenue generated in 2020 increased by 27.1% from the $125.5 million from the first six months of last year.