NEW YORK (Reuters) - DraftKings Inc on Thursday completed its $3.3 billion reverse merger with blank-check company Diamond Eagle Acquisition Corp, teeing up the U.S. sports betting company to make its Nasdaq debut at a time when there is almost no live sports.
The deal closing is a sign of long-term optimism in the growing market for U.S. sports gambling, even as the coronavirus outbreak has frozen the sports calendar.
Shares of Diamond Eagle, a special purpose acquisition company (SPAC) that raised funds in a 2019 initial public offering to make an acquisition, are up more than 50% this year in anticipation of the DraftKings tie-up.
This bucks declines in the broader market and signals investor confidence in the deal, which was announced in December and is being completed alongside a merger with sports betting technology firm SBTech.
Crucially, the acquisition by Diamond Eagle also provides DraftKings, which lost $142.7 million last year, around $700 million in extra funding as the company deals with the hit to its business from the pandemic.
“I can’t really get into specific numbers but what I will say is that certainly without having traditional sports, while some of that gap has been made up by people gravitating towards things like e-sports and other types of content, it’s a pretty big hole to fill. So yeah, there’s been decline,” DraftKings co-founder and Chief Executive Jason Robins said in a telephone interview.
Broadcast networks and sports leagues are scrambling to reschedule games and seasons that were postponed due to the coronavirus outbreak, with some hopes that activities could be restarted in the second half of the year.
The market for U.S. sports betting received a shot in the arm from a 2018 Supreme Court ruling that struck down a 1992 federal law that barred it in most places.
Since then, 21 states and Washington, D.C., have legalized sports betting in some form, according to DraftKings’ regulatory filing.
The trend could be accelerated by local governments looking for additional revenue.
“Right now, of course, state officials are very focused on dealing with COVID but I imagine that once that dust settles, they’re looking at ways to fill budget gaps,” Robins said. “There might be an appetite for sports betting and iGaming legislation and that’s something we’re also thinking about and preparing for.”
DraftKings shares are due to start trading on Nasdaq on Friday under the symbol “DKNG.”
Reporting by Joshua Franklin in New York; Additional reporting by Sheila Dang in New York; Editing by Matthew Lewis