DraftKings on October 5 announced a planned new stock offering of 16m shares by the company, and 16m more shares offered by existing shareholders in a move that could generate more than $1bn for the prominent sports gaming outfit.
DraftKings will not receive any of the proceeds from the sale of shares from the existing investors. But it will use net proceeds from the company’s own offering for general corporate purposes. And given DraftKings stock closed October 2 at an all-time high of $63.78 per share, those proceeds could surpass the billion-dollar mark.
More broadly, DraftKings stock has more than tripled since the company went public in April, as investors continue to embrace the expansion of the legalized American sports betting market.
But in a preliminary prospectus filed with the United States Securities & Exchange Commission, DraftKings said the ongoing Covid-19 pandemic continues to present near-term revenue challenges for the company.
“Although many sports seasons and sporting events have recommenced in recent months, Covid-19 could have a continued material advertise impact on economic and market conditions and trigger a period of continued global economic slowdown,” DraftKings said in its prospectus. “The rapid development and fluidity of this situation precludes any prediction as to the ultimate impact of Covid-19, which remains a material uncertainty and risk with respect to DraftKings, our performance, and our financial results.”
DraftKings’ near-term outlook could also be sizably impacted by the upcoming offseasons for the National Hockey League, National Basketball Association, and Major League Baseball, each of which will cover most, if not all, of the fourth quarter of 2020, and also presents a sizable scheduling issue for American regional sports networks.
The DraftKings’ stock offering will be co-led by Credit Suisse Securities LLC and Goldman Sachs & Co. LLC. Those underwriters will have a 30-day option to purchase up to an additional 4.8m shares, bring the total potential DraftKings stock offering to 36.8m shares.
Among the existing DraftKings shareholders selling some of their equity as part of this offering are the family of Robert and Jonathan Kraft, owners of the National Football League’s New England Patriots, and Shalom Meckenzie, founder of gaming technology provider SBTech, which was part of the three-way merger earlier this year to help turn DraftKings into a public company.
The Krafts, part of a large series of sports-related investors in DraftKings, are looking to sell 285,704 DraftKings shares in the latest offering, representing about 11 per cent of their holdings in the company. Global merchant bank The Raine Group, an early investor DraftKings, is selling about a quarter of its interest in the company, a total of more than 5.4m shares that at current value is worth about $345m.
Meckenzie is selling more than 8.5m shares, worth about $544m, but he still will personally own nearly 6 per cent of DraftKings when the offering is completed.
News of the DraftKings arrives about a month after it named global basketball icon and Charlotte Hornets owner Michael Jordan as a special advisor to the company.
The 32 million shares being offered will represent 8.6 per cent of the company’s total outstanding Class A common stock upon conclusion of the offering.