The online sports betting giant wowed investors with its bullish forecasts, minting its second … [+]
DraftKings stock took off on Wednesday after a rosy forecast that wowed Wall Street and made a billionaire out of cofounder and CEO Jason Robins, according to Forbes. The surge also pushed the fortunes of his two cofounders to about $500 million each.
Shares of the daily fantasy and sports-betting company jumped more than 11% Wednesday to close at $69.29 after an investor presentation a day earlier that saw the company raise its long-term net revenue projection from $3.7 billion to $5.4 billion, while EBITDA targets were boosted to $1.7 billion from $1.2 billion. The news came on the heels of a stellar fourth quarter that saw monthly users jump by 500,000 to 1.5 million from the previous quarter. DraftKings reported fourth-quarter revenue of $322 million, up 146% from $131 million in the prior year.
With the latest surge in DraftKings shares, 40-year-old Robins now has a net worth of $1.1 billion, according to Forbes’ calculations, making him the company’s second billionaire, after Israeli entrepreneur Shalom Meckenzie. Robins cofounded DraftKings in 2011 with Matthew Kalish and Paul Liberman, who all met while working at marketing company Vistaprint. Kalish holds a 1.8% stake in the company valued at nearly $500 million, while Liberman has a 2% stake worth nearly $550 million, Forbes estimates.
The company declined to comment on the news.
Meckenzie became a new billionaire in May 2020 after another share surge. He originally founded gambling-technology provider SBTech in 2007, which was part of the SPAC deal along with blank-check company Diamond Eagle Acquisition Corp. to take DraftKings public last April. Meckenzie now has a seat on the DraftKings board and is one of the company’s largest shareholders with a net worth of $2 billion, according to Forbes.
DraftKings was created as a daily fantasy sports outlet stemming directly from Robins’ passion for the space. “I was in 100 different [fantasy] leagues at one point,” he told Forbes in November 2020. Working out of his cofounder’s spare bedroom, DraftKings began raising capital and building momentum, eventually agreeing to deals with ESPN, MLB and the NHL.
After an insider-trading esque regulatory challenge from New York Attorney General Eric Schneiderman in 2015 and a failed merger with FanDuel in 2017, Robins and his cohorts turned the bulk of their resources toward sports gambling. In 2018, DraftKings then launched the first online sportsbook outside of Nevada in New Jersey.
It has benefited from an uptick in demand for sports gambling after the Supreme Court declared the Professional and Amateur Sports Protection Act unconstitutional in May 2018. Since then, 20 states and Washington, D.C. now have legalized sports gambling, while five others have passed legislation but have yet to launch operations. DraftKings estimates the total U.S. online sports betting market represents a $22 billion opportunity at 100% legalization, according to the company’s investor day presentation.
The SPAC merger came in the midst of the coronavirus pandemic, despite there being virtually no live sports to bet on. The stock has skyrocketed around 250% since. Robins, who collected about $54 million selling shares in 2020, still holds a stake of around 4%, including more than 11 million options.
The company’s forecast is rooted in the mainstream spread of legal gambling, which is currently being considered in California, Texas, Florida and New York, and their combined population of over 100 million people.
“That’s probably like 60% of the sports betting market in the US,” says Jeff Ifrah, a founding partner at Ifrah LLC. “The whole prize right now is to get New York, Florida, Texas and California. Those four states are going to make the difference. Whoever gets those four states are going to be clearly in the driver’s seat.”
