With the courts and the ballfields empty due to the COVID-19 pandemic, there hasn’t been much for online sportsbook and daily fantasy sports site DraftKings to work with. That, however, doesn’t mean the Boston-based company isn’t staying busy.
The company dominated headlines April 24 when it became a publicly traded company. The move, which will find DraftKings being traded on Nasdaq under the ticker symbol “DKNG,” was announced April 23.
The ability to go public was hastened when DraftKings merged with a special purpose acquisition company called Diamond Eagle Acquisition. The merger was executed Thursday and the response on Friday, despite the lack of live sports to place wagers on, was overall positive. The company stock had nearly 11.5 million trades and climbed in value throughout the day, surging as much as 18% following its opening at $9.76. The stock continued to do well the following week, climbing as high as $19.52, according to Google Finance.
Why did DraftKings choose to go public during a pandemic?
The growth of legal sports betting following a 2018 Supreme Court decision has driven interest in the industry, and the potential growth for DraftKings piqued the interest of investors. Without live sports to place bets on, the company has turned to taking wagers on such things as Russian table tennis and Madden games, and were busy for the 2020 NFL Draft.
The company has even been allowing gamblers to place wagers on the Netflix hit docuseries Tiger King, through “popularity pools.”
But all of that aside, the current pandemic-created sports drought typically wouldn’t be the ideal time for a sportsbook to go public.
“I think if we had been considering a traditional IPO, it’s possible we would have decided that now wasn’t the right time,” DraftKings CEO Jason Robins said in an interview with Bostonmix.
How has the COVID-19 pandemic affected DraftKings?
DraftKings is one of the few sports-adjacent companies that hasn’t been heavily hit by the economic downturn in the industry.
In fact, DraftKings has not laid off any workers due to the coronavirus outbreak, and is instead looking to continue hiring.
That economic downturn has been a heavy load for state governments to handle, and with their losses in revenue and expenditures in various aspects of their spending — such as unemployment payouts — there could potentially be a shift in focus to online gambling. DraftKings currently operates in just eight states, including Iowa, but that could change soon.
“There will be some budget holes that didn’t exist before that states will need to fill,” Robins told Bostonmix. “I do think it’s possible that [sports betting] is one of the things that they will consider. And it’s possible that some of the states that were maybe on the fence about this before, because they have a greater need now for tax revenue, it might get them over the fence.”
Will DraftKings stock continue to climb?
While the stock market has been in flux since the spread of COVID-19 was first reported in the US, DraftKings was able to continually gauge investor interest before deciding to make the move to go public by completing their merger with Diamond Eagle.
“It was basically like having a continual measuring stick out there that allowed us, each and every day, to say, ‘How is the market looking at us? Do we think now is the right time?’ ” Robins said to Bostonmix.
DraftKings could face a difficult opening quarter as a public company due simply to the lack of US sports happening at the moment. However, sportsbook operators are likely going to see some relief with NASCAR expected to return in May, though races will be held in front of empty stands, and the PGA Tour expected to return to competition in some form in June. Other sports, such as the WNBA, NHL and Major League Baseball, are all looking at ways to bring sports back, even without spectators.
In addition to those sports offering a potential bolstering of DraftKings stock, the company will also be able to legally operate in the state of Colorado beginning May 1.