While COVID-19 has turned the lights out on college and pro sports for the time being, sports betting firm DraftKings went public Friday after closing a $3.3 billion, three-way merger with Hollywood ties.
The company’s shares rose more than 12% in early trading after opening at $17.53 on the Nasdaq under the ticker symbol DKNG. Founded eight years ago, the company has thrived on the shift toward legalized sports betting, in the wake of a Supreme Court ruling that has thus far enabled eight states to make it legal.
The merger, which was announced last December and officially closed Thursday, brought together Draft Kings, SBTech and Diamond Eagle Acquisition Corp. The last of the three was founded by Hollywood veterans Harry Sloan, onetime CEO of MGM, and Jeff Sagansky, former head of CBS. Sloan will be vice chairman of DraftKings.
Co-founder and CEO Jason Robins addressed investors in a pre-recorded audio statement posted to the company’s website, which was not accompanied by a Q&A with analysts. He acknowledged the near-term outlook is uncertain given the wide range of outcomes for sports during the pandemic. But he said the firm is starting publicly traded life with $500 million in unrestricted cash to fund its operations. DraftKings’ investments in technology systems, he added, have enabled it to operate smoothly during COVID-19, with Esports and reality shows like Survivor, Tiger King and Top Chef drawing wagers from sports-starved fans.
“We recognize these are extraordinary times and we understand that state governments in the U.S. are prioritizing the response to COVID-19, as they absolutely should be,” Robins said. “Eventually we do expect to start and to return to a new normal. At that time, we expect that the demand in states for legal sports betting will resume.”
Major sports draws vaporized by the virus include NBA and NHL regular-season and playoff games, early Major League baseball, Masters golf and NCAA March Madness. The PGA Tour has announced plans to resume weekly tournaments without fans in June and other leagues are exploring all options for how to return safely.
As to the financial impact of the shutdown, Robins said it will depend on its length and how — or if — major pro sports leagues resume their seasons.
DraftKings, headquartered in Boston, has about 2,300 employees in five U.S. cities as well as Ireland, Ukraine, Bulgaria and Israel.