DraftKings Loses, Stock Wins

Sportsbook giant DraftKings lost $74 million in the first quarter, but the announcement led to an increase in stock prices. Such losses won’t be repeated if major sports shut down by Covid-19 concerns return by 2021 at the latest. Sports betting efforts in a number of states create optimism for the company.

During its first earnings call as a public company on May 15, DraftKings reported a net loss of $74 million in the first quarter, fueled in part by the shutdown of major sports due to the coronavirus pandemic. But the stock rose 10 percent the day of the call. That’s just one of the idiosyncrasies of the report.

DraftKings attributed portions of the loss to increased sales and marketing expenses associated with entry into five new jurisdictions. Revenue costs rose to $43 million, half of which came from taxes and revenue sharing in the new markets. The rest owed to the platform costs associated with the merger with SBTech.

Through March 10, DraftKings’ net revenue grew 60 percent pre-shutdown but ended the quarter up 30 percent instead.

Resorts Digital, DraftKings’ New Jersey partner, saw iGaming revenue jump 125.8 percent to $16.1 million. May has been consistent with April, so far, Robins said. And, the DraftKings Sportsbook launch in Colorado and iGaming launch in Pennsylvania have been in line with or better than what was expected, according to Legal Sports Report.

CEO Jason Robins does not expect future plans to suffer because of the coronavirus pandemic sports shutdown as long as major sports come back by 2021. If major sports return by the end of this year, Robins said, long-term plans may accelerate.

That’s because there appears to be momentum for states considering legislation for sports betting and iGaming, he said. There are 14 states currently looking at sports betting legislation, especially with budget deficits in so many of them.

DraftKings hopes to get involved in Illinois, Michigan, Tennessee and Virginia. Tennessee online sports betting should be the first of those to launch.

Robins said the process following the major sports shutdown has been all about testing products and seeing what’s working. Along with betting on esports, which he said has done “really strong volume,” simulated Madden games with free-to-play fantasy competitions have been popular.

“There is a group that just loves the NFL and can’t get enough,” Robins said. “I think if you can find a way to give them that NFL experience more year-round, there’s something there.”