Without Sports, Investors Bet on Diamond Eagles’ Merger With DraftKings
By Andrew Bary
Barron's
April 24, 2020 7:30 pm ET
Illustration by Elias Stein
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With casinos closed and sports betting moribund, online casino-style gambling is a bright spot for the industry. Internet gaming revenue (excluding sports wagers) in New Jersey rose 66% in March, to $65 million, the state reports. The Garden State is a leader in online gambling, which includes slots and table games like blackjack.
Only a few states allow internet gambling, including New Jersey, Pennsylvania, and Nevada. But more than 15 permit online sports gambling, and even more allow sports betting at physical casinos. In a note, Morgan Stanley gaming analyst Thomas Allen says New Jersey’s online gambling revenue (excluding sports betting) should exceed $700 million this year, up from $483 million in 2019, as bettors shift from casino and online sports wagering. Covid-19, he writes, “could spur more states to legalize online casino and sports betting.”
Investors are excited about DraftKings, which debuted on Friday after merging with Diamond Eagle Acquisition, a special purpose acquisition company. DraftKings and FanDuel used their success in fantasy sports to dominate the U.S. online sports gambling market. FanDuel is controlled by Flutter Entertainment, a U.K. sports betting company. DraftKings shares popped $1.72 to $19.25 on Friday, up about 90% from $10 in late 2019 when the company agreed to merge with Diamond Eagle and go public.
Reflecting its growth potential and scarcity value, DraftKings has a market value of $6.4 billion, despite net revenues last year of just $323 million and an operating loss of $147 million. That beats Penn National Gaming and Eldorado Resorts, in the $1 billion to $2 billion range, and even Caesars Entertainment, at $5 billion.
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