Stock investors betting on DraftKings with additional sports wagering expansion coming By Howard Stutz, Executive Editor, CDC Gaming Reports May 5, 2020 at 7:00 pm Sports betting and daily fantasy website DraftKings launched as a public company two weeks ago with extraordinarily little to wager on. That is, unless you have intimate knowledge of soccer from Belarus or Russian table tennis. That fact didn’t deter investors. Shares of DraftKings rose more than 10% on the Nasdaq on the first day of trading, and the pace hasn’t slowed. On Tuesday, the company closed at $21.61, up 2.95% following Monday’s 4.4% jump. Morgan Stanley gaming analyst Thomas Allen isn’t discouraged that college sports and the major professional sports leagues have been sidelined since mid-March by the COVID-19 coronavirus pandemic. When sports make a comeback, Allen said, the annual revenues for legal bookmakers could be anywhere from $8 billion to $12 billion annually by 2025, compared to what now looks like a relatively paltry $1.5 billion in 2019. “We think DraftKings will reach 20% market share of U.S. sports betting and 15% of online gambling,” Allen wrote in an April 30 research note launching Morgan Stanley’s coverage of the Boston-based company. DraftKings headquarters in Boston “COVID-19 today is having the clear negative effect of eliminating sporting events for people to bet on,” Allen noted. “We expect resulting weaker state budgets to push more states to search for new tax revenues, and sports betting (and) iGaming to be the answer.” Last week, Colorado became the 18th state to launch legal sports betting ahead of next week’s second anniversary of the Supreme Court ruling that ended the Professional and Amateur Sports Protection Act. Four other states – Tennessee, North Carolina, Virginia, and Washington – have legalized the activity but are still tweaking regulations before launching. Nearly 1,000 commercial and tribal casinos in 43 states have closed in the past eight weeks in an effort to slow the spread of the pandemic. Sports gamblers, however, are itching to get back into the game, which is one reason mobile sports betting operators have set lines on obscure activities. DraftKings is taking bets on South Korea’s K League Soccer and the Korea Baseball Organization, whose games ESPN began televising this week. However, NASCAR has scheduled televised races this month from Darlington Raceway and Charlotte Motor Speedway, both to be held without fans. The UFC 249 is scheduled to take place Saturday in Jacksonville, Florida through a pay-per-view channel. “NASCAR’s return this month is welcome news not just for the millions of racing fans but for sportsbook operators and bettors who have lacked meaningful opportunities to wager,” said sports gaming consultant Sara Slane. “This period of time in which NASCAR is the only active major sport, other than UFC, presents an unexpected chance to realize sports betting’s potential and make up for a loss of other traditional revenue streams that are unavailable during this global pandemic.” The DraftKings logo on an NHL arena dasher board DraftKings went forward with its stock market debut, originally announced in December, despite the empty tote boards. By merging with Diamond Eagle Acquisition Corp., a blank-check company, and acquiring sports gambling platform supplier SBTech, the company is taking a long-term approach. Once sports returns, Allen said, DraftKings will have more than $500 million in available cash for a national advertising campaign and the ability to grow when “some competitors are in difficult liquidity positions.” DraftKings’ mobile sports betting emphasis means the company doesn’t have to wait for casinos to reopen. “DraftKings is an almost pure play on the early-stage legal U.S. sports betting and iGaming growth opportunity, with a customer-acquisition advantage,” Allen wrote. On Monday, ESPN said a majority of sports fans would rather watch televised sports without fans rather than having to wait for sports to resume only when fans can be in attendance. That finding bodes well for DraftKings and other sports betting operators. DraftKings co-founder and CEO Jason Robins, who remained head of the merged operation, told the Associated Press the company will benefit from pent-up fan enthusiasm when games return. DraftKings currently operates sportsbooks in eight states, with its fantasy sports offerings available in 43 states. One state notably missing from the DraftKings portfolio is Nevada. In January, the company unveiled its leased office space in an upscale mixed-use development in Las Vegas to house its customer experience, sportsbook traders, and other services that support DraftKings’ retail and online sports betting operations. Co-founder Matt Kalish, who serves as DraftKings’ North America president, hinted the company could be eyeing a Nevada casino sportsbook operation, which would be required to launch mobile wagering and daily fantasy. Nevada “is the ground zero for sports betting, and we need to be a part of that market,” Kalish said. DraftKings’ cash position could make Nevada a reality. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at email@example.com. Follow @howardstutz on Twitter.