BOSTON (AP) — Sports daily fantasy and betting website DraftKings made its stock market debut Friday against a backdrop of a near-complete shutdown of athletic competition across the globe due to the coronavirus pandemic.
The gamble appeared to pay off, with the Boston-based company’s shares jumping 10% in afternoon trading.
DraftKings’ move to Wall Street was sealed Thursday after shareholders of a blank-check company, Diamond Eagle Acquisition Corp., approved a merger. Blank check companies typically are publicly traded but have no operations of their own and aim to acquire or merge with others.
The two also combined with sports gambling platform supplier SBTech, giving the new company a market value of $3.3 billion.
DraftKings co-founder and CEO Jason Robins remains the head of the merged company. In a telephone interview with The Associated Press, Robins said he believes that the long-term outlook for sports gambling remains strong, and that the company may even benefit from pent-up fan enthusiasm when games return.
“I hope and believe that sports will come back and people will continue to have a strong appetite for sports,” Robins said. “If there is a trend away from being outdoors and going to the public places, you could actually see an increase in sports viewership once traditional sports are being played again. You could also see an increase in online activity.”
States with dwindling tax revenues could also turn to sports gambling as a source of funds, Robins said. Since the U.S. Supreme Court lifted a federal ban, 14 states have legalized sports betting in some format. DraftKings operates a sportsbook in eight of them, with its fantasy sports offerings available in 43 states.
Robins noted that the company’s digital nature also gives it an advantage in a future where social distancing is more prevalent.
“We don’t have a big brick and mortar presence, where a lot of our employees are literally not able to go into work,” he said.
DraftKings’ 950 Boston-based employees have all transitioned to working from home, as has Robins. The only time he has gone into the office this month was to record a video for Friday’s “virtual bell-ringing” on the Nasdaq market for the company’s start of trading under the DKNG stock symbol.
The deal announced in December and finalized this week involves $304 million in institutional investments and a Diamond Eagle trust account that contained as much as $400 million. The combined company will have over $500 million of unrestricted cash, DraftKings said.
Robins said that the deal’s structure protected it from the stock market’s swoon triggered by the coronavirus pandemic. Diamond Eagle raised its money last May, and the institutional investments were committed in the fall.
“It’s a good structure given the environment,” he said.