G2E 2020: Jason Robins Welcomes Stiff Competition As DraftKings Navigates Through Coronavirus Challenges

Since a positive COVID-19 test from Utah Jazz center Rudy Gobert triggered an extended global sports freeze in March, the global sports betting industry has confronted unprecedented challenges over the last seven months.

Top sportsbook operators hit a nadir in the spring when the postponement of three major U.S. sports leagues forced books to showcase obscure sports such as Russian table tennis. The companies rebounded last month when a unique sports calendar featuring simultaneous NFL, NBA, NHL, and MLB action produced record handle throughout the nation. Through it all, DraftKings CEO Jason Robins commended his staff for making a smooth transition to the public markets despite considerable disruptions brought by the global pandemic.

“It’s a really strange and hopefully a once-in-a-lifetime experience we’re all living through,” Robins said Wednesday at the 2020 Global Gaming Expo (G2E). “As we watched all of our lives shift and change, the team has really stepped up in a big way. It feels like we’re more productive than ever.”

On Wednesday, Robins was joined by Chickasaw Nation Secretary of Commerce Bill Lance and Delaware North Co-CEO Lou Jacobs for a panel discussion on the industry’s response to the pandemic. The panel moderated by CNBC contributor Contessa Brewer focused on the gaming industry’s timeline for recovery and the steady transition to mobile betting, as many consumers opt to gamble from home.

A winning mentality

Weeks after its April public debut, DraftKings enjoyed a meteoric rise throughout the summer. By mid-June, DraftKings’ shares more than doubled, eclipsing $42 a share. Other top gaming companies have been buoyed by the return of sports. On Sept. 30, Penn National Gaming topped $75 a share, surging more than 40% from its stock price three weeks earlier when it announced the launch of the Barstool mobile sports betting app.

Pressed by Brewer on if the sports betting industry is getting too big, too quickly, Robins demurred. Instead, Robins noted that DraftKings remains focused on growing the underlying fundamentals of the company, rather than worrying about hitting a certain valuation. The former, he said, is the best way to maximize value.

To that end, DraftKings has ratcheted marketing spending in recent months. Earlier this month, DraftKings projected that it spent somewhere between $200 million and $210 million on sales and marketing expenses over the third quarter. DraftKings commercials have become a fixture of NFL contests and nightly episodes of ESPN’s SportsCenter. While DraftKings trails chief rival FanDuel in some jurisdictions, most notably New Jersey, the company has notched upwards of 40% market share in other states.

“We’ve always felt that we can outcompete anybody,” Robins said.

Borrowing from a sports analogy, Robins noted that “every NFL player wants to play in the Super Bowl,” a mentality he believes DraftKings continues to adopt in attaining market share. The most intense competitors are not scared by “31 other teams,” or the one team they face for the title, he added. Undeterred by the challenges, the top performers are motivated by their strongest adversaries, Robins explained.

“We have the same mentality, we think that more competition, better competition means that the prize must be bigger, and that’s a good thing,” Robins said.

By some estimates, the total addressable market (TAM) for U.S. legalized sports betting could exceed $10 billion annually over the next decade.

Falling from record highs

More recently, however, DraftKings shares have fallen sharply. Since hitting an all-time high of $64.19 a share on Oct. 2, DraftKings has plunged more than 42% over the last three weeks. On Wednesday, DraftKings fell to an intraday low of $37.12 a share, dropping to its lowest level since early-September. Penn National has also retreated, of late, falling to around $57 a share.

On Oct. 20, when a set of DraftKings’ restricted stock units vested, Robins received 2,315,612 shares of Class A Common Stock withheld by the company, according to a Form 4 filing submitted to the U.S. Securities and Exchange Commission (SEC). Robins also received the net of the 5,221,221 shares of Class A Common Stock underlying the restricted stock units, the filing stated.

At present, DraftKings maintains a market capitalization of around $14.7 billion. When DraftKings went public on April 24, company shares gained roughly 10% on the session to $19.35, producing a market cap in excess of $6 billion.

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