***** Crossposted from wallstreetbets *****
UK's Genius Sports bets on NY-listed SPAC to go public in $1.5 billion deal
https://www.geniussports.com/
Investor Presentation
TLDR at bottom
We've seen a huge shift in momentum for SPACs lately with pretty much every SPAC from fraudulent to zero revenue mooning to a pretty high entry point. Do you know what genuine company has been under the radar and stayed relatively unknown? Genius Sports.
Genius Sports (Ticker: DMYD) basically captures and provides sports stats, data and technology that powers sports betting platforms, such as DraftKings, Fanduel, etc. on behalf of professional leagues

• Some things to note:
  • With the advent of in-sports real-time betting, the market is exploding at over 25% annually
  • More states are legalizing sports betting, serving as a major growth catalyst: Genius customers are seeing 2-3x revenue growth in 2020
  • Sports leagues are coming back in fully in 2021 with COVID vaccination just on the horizon
  • This is a duopoly market with high barriers of entry, the other main rival being Sportsradar (remember the FEAC hype?)
• Genius has a clear economic moat built around:
  • Proprietary technology to track and record in-game statistics on behalf of major sports leagues, in exchange for data rights
  • 7,000+ statisticians and agents on the ground, managing 240K+ events per year
  • Highly customizable software that manages every aspect of a sportsbook’s data and trading offering, including advertising and streaming services
  • Significant opportunity for inorganic growth via M&A
  • Highly fragmented market for technology, content and media within sports ripe for consolidation to boost growth outside of plan

Partnerships
Their technology has proved to be incredibly well made with long term contracts with some big dogs you'll recognize:
Basketball: NBA, NCAA, March Madness
Soccer: FIFA, Premier League, Serie A, Bundesliga
Golf: PGA, LPGA, European Tour
Racing: NASCAR
Online Sportsbooks: DraftKings & Fanduel
Traditional Sportsbooks: MGM, Caesars, SkyBet, William Hill
Financials

• Already makes $140M+ in revenue AND is profitable, with $14M in 2020 EBITDA
• Growing at 30% CAGR, with $230M revenue and $68M EBITDA by 2022
• $500M+ EBITDA potential in the horizon
• Customer contracts have guaranteed minimums with upside on usage. The majority of 2020 revenue is locked in for 3-4 years on average
• Only ever lost one customer in the past three years

Trading dynamics

• Deal was overlooked because it was announced just before the election (10/27/20), one of the worst trading weeks for the entire market
• Reddit following has been limited and Stocktwits nonexistent
• Average volume of 501.66K with a LOI signed.

If Genius Sports were to trade at similar 2022E revenue multiple of 19x as Draftkings, it would imply a stock price of $24-25
TLDR: Long DMYD because it’s a huge sleeper pick. These guys run the sports betting industry behind the scenes & make a ton of money in a fast-growing market. Basically they’re the guys who sold shovels and jeans to the miners during the Gold Rush.

Hi everyone! I am working non-stop provide the best research and analysis regarding DraftKings (NASDAQ: DKNG). I originally posted my overall investment thesis on the company a few weeks back and now I am breaking down and analyzing the latest news and developments regarding DKNG! And no, it is not the ticker symbol for Donkey Kong.
DraftKings in my opinion, is the best pure play investment if you want some exposure to the sports betting, iGaming, and daily fantasy sports space. They're founder led (3 founders to be exact) and they're invested into the company themselves right alongside all of us shareholders or potential shareholders.
Within the last week, there has been some exciting developments regarding DraftKings. I will share them below:
DK Gift Cards Are Live! You can buy a DK gift card as a stocking stuffer for Christmas if you want.
I’m really excited to hear this news. It’s only going to increase the brand awareness of DK and that’s what we want. According to the press release on DK’s investor relations website, they’ve partnered with InComm Payments to facilitate the launching of the gift cards. InComm payments is a global leading payments technology company that has a network of retailers that DK will be able to leverage through this partnership. Convenience stores like 7-Eleven, Speedway and Dollar General are just some of the many convenience stores in Incomm Payments’ network that DK will be able to leverage. For now, the gift cards will be offered in $50 and $25 denominations.
The great thing about this to me is that they’ve beat their competitors to this. That shows managements initiative and ability to get things done which I complimented when I first picked this company. As of right now, you’re not going to be seeing any “FanDuel” (boo FanDuel *thumbs down emoji*) gift cards in the stores. Tim Richardson, the Senior Vice President at InComm Payments was quoted as saying “DraftKings will benefit from having its brand present in tens of thousands of Incomm Payments’ retail partner locations across the US”. Overall, good news for DK.
New York State – Getting desperate? Do they need some online sports gambling revenue?
I want to make this clear before I write about this topic – sports betting is already legal in New York state. The problem is, it’s only legal in brick and mortar (retail) locations. Just under a dozen upstate casinos can operate brick and mortar sports books at the moment. In typical DK fashion, they’re already active in a casino in New York State. DK offers in person brick and mortar sports betting through the Del Lago Resort Casino in Waterloo, NY. My news update I’m sharing is that it appears New York state might be considering expanding to online sports betting too due to a budget shortfall they’re experiencing (they need more tax revenue).
This news came out on Wednesday, 12/16/20 during the day time. Governor Cuomo had a press conference during the day. The press conference was primarily focused on giving an update on the COVID-19 pandemic in New York state. During the presser, the topic of New York state’s budget shortfalls came up. As a possible financial solution, Cuomo said “Are there other ways to get revenue? How about marijuana? How about sports betting?” He’s referring to the possible tax revenue that could be collected if sports betting offerings were expanded beyond just the brick and mortar offerings. What if every New Yorker could place a sports wager from the comfort of their own home on their cell phone?
The battle for legalizing online sports gambling in New York has been going on for years. Governor Cuomo has always been opposed to it. One of the reasons Gov. Cuomo has cited in the past is that he thinks a constitutional amendment would need to be made to New York state law to allow for mobile sports betting in the state. However, one state representative from New York that has been pushing hard for online sports gambling begs to differ. In response to Cuomo’s comments in the presser earlier that day, State Senator Joseph Addabbo said that there would be no constitutional problem with mobile sports betting because the servers could be placed on site of grandfathered in physical casinos. Addabo said that New York state’s need for revenue is “real and immediate”
This is a situation to keep a close eye on. The impacts of legalizing mobile sports betting in NY would be substantial for DK as it would open the population of 20 million people in NY state the opportunity to place wagers on the DK Sportsbook app through the comfort of their home. I imagine it wouldn’t be too difficult for DK to mobilize once they get the green light for mobile betting as they already have the standing relationship with Del Lago Resort Casino for in person betting.
The Michigan Gaming Control Board (MGCB) granted DK a provisional license to conduct online gaming and sports betting in the state of Michigan
For this update I also want to be clear – retail (brick and mortar) and mobile sports betting are already legal in the state of Michigan. It’s just that there’s a lot of yellow tape for Sportsbooks like DK to navigate within a state even after sports betting has become legalized. This provisional license provided by the MGCB was provided to DK and 14 other sportsbooks (including rival FanDuel) on Thursday, December 10th last week.
Now there are just a few more regulatory requirements that DK has to meet in the state of Michigan before they can go live. According to http://www.michigan.gov, “Before launch happens, the platform providers must complete additional regulatory requirements including independent testing of platforms and games and MGCB approval of their internal controls, which ensure gaming integrity. The firms also must secure occupational licenses for certain employees.” You can read the full article on Michigan’s government website here.
Knowing that DK has a knack for being quick to mobilize once they’re given opportunities in respective states, I fully expect them to pass these last few tests with flying colors. The DK Sportsbook app has already been available in the state of Michigan for “free to enter” games. Once they pass the last few requirements, actual wagers will be allowed to be placed. And money will be allowed to be made!
Another promising sign coming out of the state of Michigan, is that on November 30th, 2020, DK became an official sports betting partner of the Detroit Pistons, the NBA basketball team in Michigan. DK Chief Business Officer, Ezra Kucharz, was on the record after the deal closed saying “As our first professional team activation in the state of Michigan, we are thrilled to join forces with the Detroit Pistons ahead of our pending market introduction”. In my opinion, I anticipate we’ll be seeing DK online sports betting in Michigan some time in early 2021.
This concludes my update and analysis on DraftKings.
TL:DR

• Draftkings now offers gift cards and you can buy them in convenience stores (first sports betting company to do so)
• DraftKings received a provisional license to conduct sports gambling in Michigan
• Governor Cuomo of NY said he would consider legalizing "mobile sports betting" to raise additional tax revenue
• If you would like to read my original deep dive and analysis on DKNG, you can check it out here:
  • DraftKings Deep Dive and Analysis - Investment Thesis

UK's Genius Sports bets on NY-listed SPAC to go public in $1.5 billion deal
https://www.geniussports.com/
Investor Presentation
TL;DR at bottom
We've seen a huge shift in momentum for SPACs lately with pretty much every SPAC from fraudulent to zero revenue mooning to a pretty high entry point. Do you know what genuine company has been under the radar and stayed relatively unknown? Genius Sports.
Genius Sports (Ticker: DMYD) basically captures and provides sports stats, data and technology that powers sports betting platforms, such as DraftKings, Fanduel, etc. on behalf of professional leagues

• Some things to note:
  
  • With the advent of in-sports real-time betting, the market is exploding at over 25% annually
  • More states are legalizing sports betting, serving as a major growth catalyst: Genius customers are seeing 2-3x revenue growth in 2020
  • Sports leagues are coming back in fully in 2021 with COVID vaccination just on the horizon
  • This is a duopoly market with high barriers of entry, the other main rival being Sportsradar (remember the FEAC hype?)
• Genius has a clear economic moat built around:
  
  • Proprietary technology to track and record in-game statistics on behalf of major sports leagues, in exchange for data rights
  • 7,000+ statisticians and agents on the ground, managing 240K+ events per year
  • Highly customizable software that manages every aspect of a sportsbook’s data and trading offering, including advertising and streaming services
  • Significant opportunity for inorganic growth via M&A
  • Highly fragmented market for technology, content and media within sports ripe for consolidation to boost growth outside of plan

Partnerships
Their technology has proved to be incredibly well made with long term contracts with some big dogs you'll recognize:
Basketball: NBA, NCAA, March Madness
Soccer: FIFA, Premier League, Serie A, Bundesliga
Golf: PGA, LPGA, European Tour
Racing: NASCAR
Online Sportsbooks: DraftKings & Fanduel
Traditional Sportsbooks: MGM, Caesars, SkyBet, William Hill
Financials

• Already makes $140M+ in revenue AND is profitable, with $14M in 2020 EBITDA
• Growing at 30% CAGR, with $230M revenue and $68M EBITDA by 2022
• $500M+ EBITDA potential in the horizon
• Customer contracts have guaranteed minimums with upside on usage. The majority of 2020 revenue is locked in for 3-4 years on average
• Only ever lost one customer in the past three years

Trading dynamics

• Deal was overlooked because it was announced just before the election (10/27/20), one of the worst trading weeks for the entire market
• Reddit following has been limited and Stocktwits nonexistent
• Average volume of 259.78K with a LOI signed.

If Genius Sports were to trade at similar 2022E revenue multiple of 19x as Draftkings, it would imply a stock price of $24-25
TLDR: Long DMYD because it’s a huge sleeper pick. These guys run the sports betting industry behind the scenes & make a ton of money in a fast-growing market. Basically they’re the guys who sold shovels and jeans to the miners during the Gold Rush.

To pay-off the debt, Triple 5 should make the American Dreams Mega-Mall home to the largest marijuana distributor on the American East Coast. Right next door is the Meadowlands Racetrack, a place to drink, gamble + smoke, only a 20 min bus ride away from Midtown Manhattan (10 years ago, OTB left Manhattan & the track was getting many NY'ers who took the 163 Bus to the track. There is also a train to NY Penn).
Legalized pot will be good for Fanduel, and Casinos & any Hookah / Cigar Lounges (they only places in NJ that allows indoor smoking) https://www.playmeadowlands.events/fanduel
What other places might it be good for?

DKNG has seen huge gains this week, mostly focused on Tuesday and today, Thursday. Both days saw intraday spikes on sports-world news: on Tuesday afternoon a presser with Gary Bettman was announced and on Thursday it was announced that the Premier League would return in June. Oddly, the stock did not move back down at all after Bettman’s announcement turned out to just be an expanded playoff format, and nothing about a return to the ice. The Premier League news didn’t seem to have much impact on other sports betting stocks either.
Both of these events point towards something that seems obviously clear: DraftKings’ stock is hugely overpriced, but seems to keep being driven up just by trading. I think there are cases to be made for short term bull or bear, and for long term bear. I’m already in on the long term bear case with Nov ‘20, Dec ‘20 and Jan ‘21 Puts that have all taken a beating, but debating what the profitable short term play is.
For some context, I used to trade bonds on one of the biggest desks in NY, but moved to be closer to family a while ago and run my own business. My state is not supported by DraftKings, so keep in mind when reading that I am a bit salty towards the company and their ability to sniff out VPNs. Been a long time lurker here, but this is my first post.
The company’s Q1 earnings was pretty enlightening and quite the spin job. I was shocked to see the stock rise that day after what I read to be a pretty poor outcome. Growth in marketing expenses can be written off as entering new states, but seeing no growth in net revenue despite 30% growth in gross revenue means that the company has a growth problem, in other words almost all the revenue growth was driven by giving away free bets and reducing vig. Let’s look further at revenue growth though.
I found it very interesting that the company led with “30% revenue growth” when, in fact, that was only at Old DraftKings, which makes up about 75% of New DraftKings revenue. SBTech makes up the rest and grew at only 3%, giving the public company a 23% growth rate for the quarter, not 30% - spin job.
The company also gave us an interesting insight into coronavirus’ impact on their business, maybe unintentionally. At Old DraftKings, they noted 60% growth through March 10th. If we assume each day through the quarter is equal, that means the last 21 days of the quarter would have been down 70% vs Q1 ‘19, that’s big. However, we know not all days are created equal in the world of sports, and Q1 included 5 NFL playoff days and the Super Bowl. If we assume NFL betting days are 3x a normal day and the Super Bowl is 3x a normal NFL day, you can see your way to revenue post-March 10th being down 95%. A similar look at SBTech’s drop from +19% to only +3% means revenue post-coronavirus is down at least by half.
Another interesting lens to use in looking at the company is how they pitched themselves when the merger was announced five months ago in December. On slide 22 they compare their valuation to a variety of comps, trying to show that the valuation is fair, probably trying to alleviate the fact that the valuation for DraftKings was about 4x what Paddy Power paid for FanDuel 18 months earlier. I’m going to ignore the “EV / 2021E Revenue – Growth Adjusted” multiple that they highlight, because adjusting a forward looking multiple based on your own forward looking growth projections is absolute garbage, and instead look at EV / TTM 3/31 Revenue for those same comps.
At $39 per share, DraftKings has a market cap a bit over $15 billion on TTM revenue of $451 million, giving them a revenue multiple of 33.7x. For those of you that haven’t been around the block a few times, that is outrageously high. The “High Growth Consumer Internet” category that they selected is at 8.1x and “EU Sportsbook Operators” at 3.6x. Their best comp is probably Flutter, which is Paddy Power + Fanduel + Stars, trades at 7.8x. DraftKings deserves a higher multiple than Flutter given that they are pure-play USA vs Flutter which has a lot of retail european revenue that isn’t high growth, but the two companies currently have the same market cap, despite FanDuel being a direct comp to DraftKings with more market share in the fast growing business segments. Even if you said DraftKings should trade at a 50% premium to Flutter, which is being very generous, that implies a share price of only $13.50.
I know what you’re going to say: “this is all about more states allowing sports betting.” Fine, let’s look at what would need to happen at the state-level to get DraftKings’ current valuation to be reasonable. Going back to the December investor presentation, DraftKings estimates their sports book net revenue at $2.3 billion given 25% market share and 65% of the US having online betting, with a 22% allowance for promos from Gross to Net. That let’s us back into $4.5 billion of gross revenue at 100% of the population. Let’s then give them a 30% bump on that for iGaming. Using the company’s current $15 billion valuation and the same 50% premium to Flutter’s revenue multiple above (11.7x) that means they need $1.28 billion of revenue, or $831 million more than they currently have. $831 million more revenue needed means they need 14% more of the population to legalize in the very short term. Of the big five states, CA, TX, FL, NY and PA, none are going to add any population, with PA already online, NY choosing retail-only and the other three being no where close to legalization and widely considered by researchers and lobbyists to be years away. The remaining 46 states, including DC, average 1.3% of the population each, meaning you need a windfall of states to add 14% of the population.
Don’t get started on nationally legalized sports betting, no one is even pushing for that and it is never going to happen. The SCOTUS repeal of PASPA was as much about taking away the Federal Government’s ability to make national decisions like allowing or disallowing sports betting as it was about sports betting itself. Sports betting will roll out throughout the US, but it is going to be a state-by-state slog.
Another thing to consider is what the company might do with its highly valued stock. As we saw with Tesla a few months ago, a big run up in stock price is a great time to do some financial maneuvering. I think there are two very good options for management right now. The first is obvious: follow-on equity offering. In going public via a reverse merger with a SPAC, DraftKings barely tapped the big institutional investors. A follow-on would be a great way to load up the coffers further - anyone that watched TV in 2015 knows they love to spend money on ads - at a very attractive valuation for the company. The problem with this is that new shares coming in, or the follow-on pricing poorly, could be a big drag on the current share price.
Another option might be a little less obvious, but I think could make a lot of sense for the company: Buy William Hill. William Hill currently has a market cap of about $1.5 billion. They have a huge footprint in Europe, a market that DraftKings previously tried and (largely) failed to enter, are a big threat to DraftKings’ DTC approach in the US and have the tech that powers much of the land-based casinos’ sportsbook operations in the US. DraftKings could buy them with their cheap stock, or issue new equity to raise money for the acquisition. DraftKings would add a ton of revenue, could cut lots of duplicated costs, diversify across geographies and sports to temper their seasonality, and replace WillHill’s outdated tech with their much better apps. The big downside is that the CEOs of the two companies seem to really dislike each other.
One reason that I think the stock could be up so much since the “IPO” is that there are a very small number of liquid shares. Remember that this wasn’t an IPO at all, it was a reverse merger with a SPAC, meaning that a much higher percentage of outstanding shares are currently locked up than would be in a typical IPO. That constraint on supply with big retail demand could be a huge driver in the stock gain.
Circling back to be three cases for what I think could happen: - Short term bull: Sports come back, stock (irrationally) trades up on it - Short term bear: Correction to a more realistic valuation, bulls taking gains, any of NHL, NBA, MLB announce they won’t play again in 2020, financial maneuvering by the company - Long term bear: Correction to a more realistic valuation, bulls taking gains, any of NHL, NBA, MLB announce they won’t play again in 2020, financial maneuvering by the company, Q2 or Q3 earnings disappoint/are eye opening, any blip to the NFL cash cow, NBA or NHL ‘20-’21 season delays, lockup ending in October
Just giving my two cents on how I’m looking at this and trading it, and curious to hear any other thoughts or theories on real reasons why the stock is moving and where it is going.
Last thought: for those of you that like DraftKings at this price, you should LOVE Flutter at this price.

DKNG has gained a lot the week of May 24 2020, mostly focused on May 26 (Tues) and May 28 (Thurs). Both days saw intraday spikes on sports-world news. On May 26 afternoon, a presser with Gary Bettman was announced, and on May 28, it was announced that the Premier League would return in June. Oddly, the stock did not drop at all, after Bettman’s announcement turned out to just be an expanded playoff format, and nothing about a return to the ice. The Premier League news didn’t impact other sports betting stocks either. Both events clearly imply that DKNG’ stock is hugely overpriced, but it’s being driven up just by trading. I’m not affiliated with DKNG in any way.
The company’s lousy Q1 earnings was quite the spin job, and I was shocked to see the stock rise that day! Growth in marketing expenses can be written off as entering new states, but no growth in net revenue, despite 30% growth in gross revenue, means that the company can’t actually grow. In other words, almost all revenue was grown by offering free bets and reducing vigorish. Let’s examine revenue growth further.
I was stunned that the company led with “30% revenue growth” when, in fact, that was only at Old DKNG, which constitutes 75% of New DKNG revenue. SBTech makes up the rest and grew at only 3%, giving the public company a 23% growth rate for the quarter, not the 30% spin job. DKNG might’ve unintentionally unveiled COVID19’s impact. At Old DKNG, they noted 60% growth through March 10th. If we assume that each day through the quarter is equal, that means the last 21 days of the quarter would have been down 70% vs Q1 ’19!!! This difference is hefty! But we know not all days are created equal in the world of sports, and Q1 included 5 NFL playoff days and the Super Bowl. If we assume NFL betting days are 3x a normal day and the Super Bowl is 3x a normal NFL day, revenue post-March 10th will drop 95%. Similarly, because SBTech’s dropped from +19% to only +3%, revenue post-COVID19 will drop at least by half.
Also examine how they pitched themselves when the merger was announced in Dec. 2019. On slide 22, DKNG compare their valuation to competitors’, trying to show that the valuation is fair, probably trying to counter DKNG’s valuation that was4x what Paddy Power paid for FanDuel 18 months earlier. Let’s ignore the “EV / 2021E Revenue – Growth Adjusted” multiple that they highlight, because it’s completely unreliable to adjust a forward looking multiple based on your own forward-looking growth projections. Instead look at EV / TTM 3/31 Revenue for those same comparisons.
At $39 per share, DKNG has a market cap over $15 billion on TTM revenue of $451 million. So their revenue multiple is 33.7x, which is too overvalued! The “High Growth Consumer Internet” category that they selected is at 8.1x and “EU Sportsbook Operators” at 3.6x. Their best competitor is Flutter, which is Paddy Power + Fanduel + Stars, and it trades at 7.8x. DKNG deserves a higher multiple than Flutter because DKNG is pure-play USA, and Flutter earns retail European revenue that isn’t high growth. But the two companies currently have the same market cap, despite FanDuel competing directly with DKNG with more market share in the fast growing business segments. Even if you are generous to DKNG and believe they should trade at a 50% premium to Flutter, DKNG’s share price ought be just $13.50.
No, this isn’t about more states allowing sports betting. Let’s examine what must happen at the state level to value DKNG’s current valuation reasonably. In their December investor presentation, DKNG estimates their sports book net revenue at $2.3B given 25% market share and 65% of the US having online betting, with a 22% allowance for promos from Gross to Net. Consider their $4.5 billion of gross revenue at 100% of the population. Let’s bump that by 30% bump for iGaming. DKNG’s current $15 billion valuation and the same 50% premium to Flutter’s revenue multiple above (11.7x), mean that DKNG need $1.28B of revenue, or $831M more than they currently have. $831M more revenue needed means 14% more of the population must legalize in the very short term. Of the big five states, CA, TX, FL, NY and PA, none will add any population, because PA is already online, NY chose retail-only and researchers and lobbyists don’t think the other three will legalize for another 5 years. The remaining 46 states, including DC, average 1.3% of the population each, meaning you need a windfall of states to add 14% of the population.
Forget nationally legalized sports betting, because no one is even pushing for that and it won’t happen. SCOTUS invalidated PASPA to remove the Federal Government’s ability to make national decisions like (dis)allowing sports betting. Sports betting will roll out throughout the US, but will slog state-by-state.
Now that DKNG’s stock has rocketed, DKNA’s management has two good strategies, like TSLA did when TSLA's stock price rocketed in Jan 2020.

1. The first is obvious: follow-on equity offering. In going public via a reverse merger with a SPAC, DKNG barely tapped the big institutional investors. This follow-on can add cash to the balance sheet. If you watched TV in 2015, you know DKNG love to spend money on ads, at a very attractive valuation for the company. What’s the problem? New shares, or if the follow-on prices poorly, can lower the current share price.
   
2. The less obvious option is to buy a competitor, William Hill, that has a market cap of about $1.5B. They have a huge footprint in Europe, a market that DKNG previously tried and failed to enter. Europe threatens DKNG’ DTC approach in the US, and Europe has the IT that powers much of the land-based casinos’ sportsbook operations in the US. DKNG could buy them with their cheap stock, or issue new equity to raise money for the acquisition. DKNG would add much revenue, can cut lots of duplicated costs, diversify across countries and sports to temper their seasonality, and replace William Hill’s outdated tech with DKNG’s better apps. The downside is that these two companies’ CEOs dislike each other.
   

What’s one reason the stock has risen so much since the “IPO”? Because DKNG has a teensy number of liquid shares. Remember this wasn’t an IPO at all, it was a reverse merger with a SPAC, so a much higher percentage of outstanding shares are currently locked up than in a typical IPO. That constraint on supply with big retail demand could boost the stock price! I’ll summarize the 3 cases for DKNG.

1. Short term bull: Sports come back, stock (irrationally) trades up on it.
2. Short term bear: Stock price corrects to a more realistic valuation. Bulls take gains. Any of NHL, NBA, MLB announce they won’t play again in 2020. Company decides on more financial maneuvering.
3. Long term bear: Q2 or Q3 earnings disappoint. The NFL cash cow drops or NBA or NHL ‘20-’21 season gets delayed. Lockup ends in October 2020.

DKNG has gained a lot the week of May 24 2020, mostly focused on May 26 (Tues) and May 28 (Thurs). Both days saw intraday spikes on sports-world news. On May 26 afternoon, a presser with Gary Bettman was announced, and on May 28, it was announced that the Premier League would return in June. Oddly, the stock did not drop at all, after Bettman’s announcement turned out to just be an expanded playoff format, and nothing about a return to the ice. The Premier League news didn’t impact other sports betting stocks either. Both events clearly imply that DKNG’ stock is hugely overpriced, but it’s being driven up just by trading. I’m not affiliated with DKNG in any way.
The company’s lousy Q1 earnings was quite the spin job, and I was shocked to see the stock rise that day! Growth in marketing expenses can be written off as entering new states, but no growth in net revenue, despite 30% growth in gross revenue, means that the company can’t actually grow. In other words, almost all revenue was grown by offering free bets and reducing vigorish. Let’s examine revenue growth further.
I was stunned that the company led with “30% revenue growth” when, in fact, that was only at Old DKNG, which constitutes 75% of New DKNG revenue. SBTech makes up the rest and grew at only 3%, giving the public company a 23% growth rate for the quarter, not the 30% spin job. DKNG might’ve unintentionally unveiled COVID19’s impact. At Old DKNG, they noted 60% growth through March 10th. If we assume that each day through the quarter is equal, that means the last 21 days of the quarter would have been down 70% vs Q1 ’19!!! This difference is hefty! But we know not all days are created equal in the world of sports, and Q1 included 5 NFL playoff days and the Super Bowl. If we assume NFL betting days are 3x a normal day and the Super Bowl is 3x a normal NFL day, revenue post-March 10th will drop 95%. Similarly, because SBTech’s dropped from +19% to only +3%, revenue post-COVID19 will drop at least by half.
Also examine how they pitched themselves when the merger was announced in Dec. 2019. On slide 22, DKNG compare their valuation to competitors’, trying to show that the valuation is fair, probably trying to counter DKNG’s valuation that was4x what Paddy Power paid for FanDuel 18 months earlier. Let’s ignore the “EV / 2021E Revenue – Growth Adjusted” multiple that they highlight, because it’s completely unreliable to adjust a forward looking multiple based on your own forward-looking growth projections. Instead look at EV / TTM 3/31 Revenue for those same comparisons.
At $39 per share, DKNG has a market cap over $15 billion on TTM revenue of $451 million. So their revenue multiple is 33.7x, which is too overvalued! The “High Growth Consumer Internet” category that they selected is at 8.1x and “EU Sportsbook Operators” at 3.6x. Their best competitor is Flutter, which is Paddy Power + Fanduel + Stars, and it trades at 7.8x. DKNG deserves a higher multiple than Flutter because DKNG is pure-play USA, and Flutter earns retail European revenue that isn’t high growth. But the two companies currently have the same market cap, despite FanDuel competing directly with DKNG with more market share in the fast growing business segments. Even if you are generous to DKNG and believe they should trade at a 50% premium to Flutter, DKNG’s share price ought be just $13.50.
No, this isn’t about more states allowing sports betting. Let’s examine what must happen at the state level to value DKNG’s current valuation reasonably. In their December investor presentation, DKNG estimates their sports book net revenue at $2.3B given 25% market share and 65% of the US having online betting, with a 22% allowance for promos from Gross to Net. Consider their $4.5 billion of gross revenue at 100% of the population. Let’s bump that by 30% bump for iGaming. DKNG’s current $15 billion valuation and the same 50% premium to Flutter’s revenue multiple above (11.7x), mean that DKNG need $1.28B of revenue, or $831M more than they currently have. $831M more revenue needed means 14% more of the population must legalize in the very short term. Of the big five states, CA, TX, FL, NY and PA, none will add any population, because PA is already online, NY chose retail-only and researchers and lobbyists don’t think the other three will legalize for another 5 years. The remaining 46 states, including DC, average 1.3% of the population each, meaning you need a windfall of states to add 14% of the population.
Forget nationally legalized sports betting, because no one is even pushing for that and it won’t happen. SCOTUS invalidated PASPA to remove the Federal Government’s ability to make national decisions like (dis)allowing sports betting. Sports betting will roll out throughout the US, but will slog state-by-state.
Now that DKNG’s stock has rocketed, DKNA’s management has two good strategies, like TSLA did when TSLA's stock price rocketed in Jan 2020.

1. The first is obvious: follow-on equity offering. In going public via a reverse merger with a SPAC, DKNG barely tapped the big institutional investors. This follow-on can add cash to the balance sheet. If you watched TV in 2015, you know DKNG love to spend money on ads, at a very attractive valuation for the company. What’s the problem? New shares, or if the follow-on prices poorly, can lower the current share price.
   
2. The less obvious option is to buy a competitor, William Hill, that has a market cap of about $1.5B. They have a huge footprint in Europe, a market that DKNG previously tried and failed to enter. Europe threatens DKNG’ DTC approach in the US, and Europe has the IT that powers much of the land-based casinos’ sportsbook operations in the US. DKNG could buy them with their cheap stock, or issue new equity to raise money for the acquisition. DKNG would add much revenue, can cut lots of duplicated costs, diversify across countries and sports to temper their seasonality, and replace William Hill’s outdated tech with DKNG’s better apps. The downside is that these two companies’ CEOs dislike each other.
   

What’s one reason the stock has risen so much since the “IPO”? Because DKNG has a teensy number of liquid shares. Remember this wasn’t an IPO at all, it was a reverse merger with a SPAC, so a much higher percentage of outstanding shares are currently locked up than in a typical IPO. That constraint on supply with big retail demand could boost the stock price! I’ll summarize the 3 cases for DKNG.

1. Short term bull: Sports come back, stock (irrationally) trades up on it.
2. Short term bear: Stock price corrects to a more realistic valuation. Bulls take gains. Any of NHL, NBA, MLB announce they won’t play again in 2020. Company decides on more financial maneuvering.
3. Long term bear: Q2 or Q3 earnings disappoint. The NFL cash cow drops or NBA or NHL ‘20-’21 season gets delayed. Lockup ends in October 2020.

DKNG has gained a lot the week of May 24 2020, mostly focused on May 26 (Tues) and May 28 (Thurs). Both days saw intraday spikes on sports-world news. On May 26 afternoon, a presser with Gary Bettman was announced, and on May 28, it was announced that the Premier League would return in June. Oddly, the stock did not drop at all, after Bettman’s announcement turned out to just be an expanded playoff format, and nothing about a return to the ice. The Premier League news didn’t impact other sports betting stocks either. Both events clearly imply that DKNG’ stock is hugely overpriced, but it’s being driven up just by trading. I’m not affiliated with DKNG in any way.
The company’s lousy Q1 earnings was quite the spin job, and I was shocked to see the stock rise that day! Growth in marketing expenses can be written off as entering new states, but no growth in net revenue, despite 30% growth in gross revenue, means that the company can’t actually grow. In other words, almost all revenue was grown by offering free bets and reducing vigorish. Let’s examine revenue growth further.
I was stunned that the company led with “30% revenue growth” when, in fact, that was only at Old DKNG, which constitutes 75% of New DKNG revenue. SBTech makes up the rest and grew at only 3%, giving the public company a 23% growth rate for the quarter, not the 30% spin job. DKNG might’ve unintentionally unveiled COVID19’s impact. At Old DKNG, they noted 60% growth through March 10th. If we assume that each day through the quarter is equal, that means the last 21 days of the quarter would have been down 70% vs Q1 ’19!!! This difference is hefty! But we know not all days are created equal in the world of sports, and Q1 included 5 NFL playoff days and the Super Bowl. If we assume NFL betting days are 3x a normal day and the Super Bowl is 3x a normal NFL day, revenue post-March 10th will drop 95%. Similarly, because SBTech’s dropped from +19% to only +3%, revenue post-COVID19 will drop at least by half.
Also examine how they pitched themselves when the merger was announced in Dec. 2019. On slide 22, DKNG compare their valuation to competitors’, trying to show that the valuation is fair, probably trying to counter DKNG’s valuation that was4x what Paddy Power paid for FanDuel 18 months earlier. Let’s ignore the “EV / 2021E Revenue – Growth Adjusted” multiple that they highlight, because it’s completely unreliable to adjust a forward looking multiple based on your own forward-looking growth projections. Instead look at EV / TTM 3/31 Revenue for those same comparisons.
At $39 per share, DKNG has a market cap over $15 billion on TTM revenue of $451 million. So their revenue multiple is 33.7x, which is too overvalued! The “High Growth Consumer Internet” category that they selected is at 8.1x and “EU Sportsbook Operators” at 3.6x. Their best competitor is Flutter, which is Paddy Power + Fanduel + Stars, and it trades at 7.8x. DKNG deserves a higher multiple than Flutter because DKNG is pure-play USA, and Flutter earns retail European revenue that isn’t high growth. But the two companies currently have the same market cap, despite FanDuel competing directly with DKNG with more market share in the fast growing business segments. Even if you are generous to DKNG and believe they should trade at a 50% premium to Flutter, DKNG’s share price ought be just $13.50.
No, this isn’t about more states allowing sports betting. Let’s examine what must happen at the state level to value DKNG’s current valuation reasonably. In their December investor presentation, DKNG estimates their sports book net revenue at $2.3B given 25% market share and 65% of the US having online betting, with a 22% allowance for promos from Gross to Net. Consider their $4.5 billion of gross revenue at 100% of the population. Let’s bump that by 30% bump for iGaming. DKNG’s current $15 billion valuation and the same 50% premium to Flutter’s revenue multiple above (11.7x), mean that DKNG need $1.28B of revenue, or $831M more than they currently have. $831M more revenue needed means 14% more of the population must legalize in the very short term. Of the big five states, CA, TX, FL, NY and PA, none will add any population, because PA is already online, NY chose retail-only and researchers and lobbyists don’t think the other three will legalize for another 5 years. The remaining 46 states, including DC, average 1.3% of the population each, meaning you need a windfall of states to add 14% of the population.
Forget nationally legalized sports betting, because no one is even pushing for that and it won’t happen. SCOTUS invalidated PASPA to remove the Federal Government’s ability to make national decisions like (dis)allowing sports betting. Sports betting will roll out throughout the US, but will slog state-by-state.
Now that DKNG’s stock has rocketed, DKNA’s management has two good strategies, like TSLA did when TSLA's stock price rocketed in Jan 2020.

1. The first is obvious: follow-on equity offering. In going public via a reverse merger with a SPAC, DKNG barely tapped the big institutional investors. This follow-on can add cash to the balance sheet. If you watched TV in 2015, you know DKNG love to spend money on ads, at a very attractive valuation for the company. What’s the problem? New shares, or if the follow-on prices poorly, can lower the current share price.
   
2. The less obvious option is to buy a competitor, William Hill, that has a market cap of about $1.5B. They have a huge footprint in Europe, a market that DKNG previously tried and failed to enter. Europe threatens DKNG’ DTC approach in the US, and Europe has the IT that powers much of the land-based casinos’ sportsbook operations in the US. DKNG could buy them with their cheap stock, or issue new equity to raise money for the acquisition. DKNG would add much revenue, can cut lots of duplicated costs, diversify across countries and sports to temper their seasonality, and replace William Hill’s outdated tech with DKNG’s better apps. The downside is that these two companies’ CEOs dislike each other.
   

What’s one reason the stock has risen so much since the “IPO”? Because DKNG has a teensy number of liquid shares. Remember this wasn’t an IPO at all, it was a reverse merger with a SPAC, so a much higher percentage of outstanding shares are currently locked up than in a typical IPO. That constraint on supply with big retail demand could boost the stock price! I’ll summarize the 3 cases for DKNG.

1. Short term bull: Sports come back, stock (irrationally) trades up on it.
2. Short term bear: Stock price corrects to a more realistic valuation. Bulls take gains. Any of NHL, NBA, MLB announce they won’t play again in 2020. Company decides on more financial maneuvering.
3. Long term bear: Q2 or Q3 earnings disappoint. The NFL cash cow drops or NBA or NHL ‘20-’21 season gets delayed. Lockup ends in October 2020.

DKNG has gained a lot the week of May 24 2020, mostly focused on May 26 (Tues) and May 28 (Thurs). Both days saw intraday spikes on sports-world news. On May 26 afternoon, a presser with Gary Bettman was announced, and on May 28, it was announced that the Premier League would return in June. Oddly, the stock did not drop at all, after Bettman’s announcement turned out to just be an expanded playoff format, and nothing about a return to the ice. The Premier League news didn’t impact other sports betting stocks either. Both events clearly imply that DKNG’ stock is hugely overpriced, but it’s being driven up just by trading. I’m not affiliated with DKNG in any way.
The company’s lousy Q1 earnings was quite the spin job, and I was shocked to see the stock rise that day! Growth in marketing expenses can be written off as entering new states, but no growth in net revenue, despite 30% growth in gross revenue, means that the company can’t actually grow. In other words, almost all revenue was grown by offering free bets and reducing vigorish. Let’s examine revenue growth further.
I was stunned that the company led with “30% revenue growth” when, in fact, that was only at Old DKNG, which constitutes 75% of New DKNG revenue. SBTech makes up the rest and grew at only 3%, giving the public company a 23% growth rate for the quarter, not the 30% spin job. DKNG might’ve unintentionally unveiled COVID19’s impact. At Old DKNG, they noted 60% growth through March 10th. If we assume that each day through the quarter is equal, that means the last 21 days of the quarter would have been down 70% vs Q1 ’19!!! This difference is hefty! But we know not all days are created equal in the world of sports, and Q1 included 5 NFL playoff days and the Super Bowl. If we assume NFL betting days are 3x a normal day and the Super Bowl is 3x a normal NFL day, revenue post-March 10th will drop 95%. Similarly, because SBTech’s dropped from +19% to only +3%, revenue post-COVID19 will drop at least by half.
Also examine how they pitched themselves when the merger was announced in Dec. 2019. On slide 22, DKNG compare their valuation to competitors’, trying to show that the valuation is fair, probably trying to counter DKNG’s valuation that was4x what Paddy Power paid for FanDuel 18 months earlier. Let’s ignore the “EV / 2021E Revenue – Growth Adjusted” multiple that they highlight, because it’s completely unreliable to adjust a forward looking multiple based on your own forward-looking growth projections. Instead look at EV / TTM 3/31 Revenue for those same comparisons.
At $39 per share, DKNG has a market cap over $15 billion on TTM revenue of $451 million. So their revenue multiple is 33.7x, which is too overvalued! The “High Growth Consumer Internet” category that they selected is at 8.1x and “EU Sportsbook Operators” at 3.6x. Their best competitor is Flutter, which is Paddy Power + Fanduel + Stars, and it trades at 7.8x. DKNG deserves a higher multiple than Flutter because DKNG is pure-play USA, and Flutter earns retail European revenue that isn’t high growth. But the two companies currently have the same market cap, despite FanDuel competing directly with DKNG with more market share in the fast growing business segments. Even if you are generous to DKNG and believe they should trade at a 50% premium to Flutter, DKNG’s share price ought be just $13.50.
No, this isn’t about more states allowing sports betting. Let’s examine what must happen at the state level to value DKNG’s current valuation reasonably. In their December investor presentation, DKNG estimates their sports book net revenue at $2.3B given 25% market share and 65% of the US having online betting, with a 22% allowance for promos from Gross to Net. Consider their $4.5 billion of gross revenue at 100% of the population. Let’s bump that by 30% bump for iGaming. DKNG’s current $15 billion valuation and the same 50% premium to Flutter’s revenue multiple above (11.7x), mean that DKNG need $1.28B of revenue, or $831M more than they currently have. $831M more revenue needed means 14% more of the population must legalize in the very short term. Of the big five states, CA, TX, FL, NY and PA, none will add any population, because PA is already online, NY chose retail-only and researchers and lobbyists don’t think the other three will legalize for another 5 years. The remaining 46 states, including DC, average 1.3% of the population each, meaning you need a windfall of states to add 14% of the population.
Forget nationally legalized sports betting, because no one is even pushing for that and it won’t happen. SCOTUS invalidated PASPA to remove the Federal Government’s ability to make national decisions like (dis)allowing sports betting. Sports betting will roll out throughout the US, but will slog state-by-state.
Now that DKNG’s stock has rocketed, DKNA’s management has two good strategies, like TSLA did when TSLA's stock price rocketed in Jan 2020.

1. The first is obvious: follow-on equity offering. In going public via a reverse merger with a SPAC, DKNG barely tapped the big institutional investors. This follow-on can add cash to the balance sheet. If you watched TV in 2015, you know DKNG love to spend money on ads, at a very attractive valuation for the company. What’s the problem? New shares, or if the follow-on prices poorly, can lower the current share price.
   
2. The less obvious option is to buy a competitor, William Hill, that has a market cap of about $1.5B. They have a huge footprint in Europe, a market that DKNG previously tried and failed to enter. Europe threatens DKNG’ DTC approach in the US, and Europe has the IT that powers much of the land-based casinos’ sportsbook operations in the US. DKNG could buy them with their cheap stock, or issue new equity to raise money for the acquisition. DKNG would add much revenue, can cut lots of duplicated costs, diversify across countries and sports to temper their seasonality, and replace William Hill’s outdated tech with DKNG’s better apps. The downside is that these two companies’ CEOs dislike each other.
   

What’s one reason the stock has risen so much since the “IPO”? Because DKNG has a teensy number of liquid shares. Remember this wasn’t an IPO at all, it was a reverse merger with a SPAC, so a much higher percentage of outstanding shares are currently locked up than in a typical IPO. That constraint on supply with big retail demand could boost the stock price! I’ll summarize the 3 cases for DKNG.

1. Short term bull: Sports come back, stock (irrationally) trades up on it.
2. Short term bear: Stock price corrects to a more realistic valuation. Bulls take gains. Any of NHL, NBA, MLB announce they won’t play again in 2020. Company decides on more financial maneuvering.
3. Long term bear: Q2 or Q3 earnings disappoint. The NFL cash cow drops or NBA or NHL ‘20-’21 season gets delayed. Lockup ends in October 2020.

There was a great opinion piece written on how BTC can help the daily fantasy industry - a billion dollars industry - but first....
Backstory: This week the NY Attorney General sent a cease and desist letter to the 2 big daily fantasy sites (DFS) - Draftkings and Fanduel - saying that it is gambling, a scourge on society, and a scam.
Whether u cant stand the carpet bombing of commercials or think it's a game of chance/skill, is a discussion for another time. U see both DK and FD have decided to fight the AG, and will have their day in court. Meanwhile and legally they will continue to operate and allow NYers to play as they assert that fantasy sports is legal under the provision in the federal UIGE act (the law that banned online pokegambling) which is how they've been able to operate so far. Imo the State wants in on the action to get their beaks wet with their homegrown casinos, so shut down the innovators, sound familiar?
The AG has pressured the payment processors to stop allowing deposits and FD as of right now stopped accepting deposits from NY. There are somewhere between 500,000 and 1 mil NYers who play at these sites.
Opportunity: It seems like a huge opportunity for a Coinbase, Circle, etc to provide their services show FD how easily it is to accept, utilize and if need be convert BTC. Possibly bringing thousands into the BTC fold. FD and DK can incentivize people to deposit BTC w free entry tickets into the million dollar tournament ($20) or one of their many tourneys.
A lot of these DFSers aren't enjoying being told what they can and can't do with their hard earned money, and starting to realize they're only as free as their crony elected officials allow them to be.
MarketPlace BTC/DFS article.
http://www.marketwatch.com/story/fanduel-draftkings-how-bitcoin-will-beat-the-online-gambling-ban-2015-11-13
Also It should come as no surprise the NY AG has many ties to the NY casino lobby.
http://www.forbes.com/sites/darrenheitne2015/11/12/why-has-the-n-y-attorney-general-targeted-daily-fantasy-sports/?ss=sports-money

I am sure many people are aware of the brewing legal fight that is upon fantasy sports and the vow from both DK and FD to fight this is court but I am going to tell you right now that they have pretty much so already lost. This fight could be years and millions of dollars in the making and although this is coming from NY and seems NY specific they will set the precedence for the rest of the states and more importantly we will see the funding mechanisms get turned off very quickly regardless of the court ruling.
From http://www.marketwatch.com/story/citigroup-reviewing-whether-to-continue-with-fanduel-draftkings-2015-11-12

Michael Zeldin, the former chief of the money laundering section at the Department of Justice and an attorney at Buckley Sandler, says his advice to a bank client, now that he’s defending them rather than prosecuting them, would be to step aside given the high risk. “Why would you choose to get in the middle of this legal battle? Generally speaking the fines these days will outstrip any benefits of staying on board.”
“These companies will put their banks and payment processors in a tough spot,” added Doug Gansler, the former attorney general of Maryland and also an attorney with Buckley Sandler, “if they choose to defy the attorney general and continue to operate in New York while fighting this order.”
The risk is especially high for those banks and processors that call New York home because their continued service to these sites may be scrutinized by a New York regulator, no matter where the transactions take place.

We know from history (ie online poker) the banking industry is quick to move from political extra-judicial leanings trying to beat the drum of "protecting the public" from themselves and the potential threat of fines down the road.
What Comes Next?
Essentially like online poker they will be pushed underground and off shore -- the industry will be choked off and suffocated from by legacy banking sector until they either give up and move offshore or go BK trying. If they do move offshore I expect them to end up like other gambling sites, either by restricting US users and/or offering alternative funding mechanisms including Netteller, Skrill, and Bitcoin.

Do you think it would help our cause if I did so? Or would a judge take umbrage to some outsider hoping to influence his decision? On Wednesday, each side will seek a preliminary injunction, who gets it will determine whether we will be able to play daily fantasy here in NY until a trial is heard. Although the losing party could ask Mendez to stay the enforcement of a junction until an appeal is heard.
I hope this becomes a drawn out thing and DraftKings and FanDuel are permitted to operate in New York throughout the process but I wouldn't have enough hard legal knowledge to know how the dice in these things roll.

This is an automatic summary, original reduced by 51%.

"Today, we have taken decisive legal action to prevent a unilateral, misinformed and legally misguided attempt by the New York Attorney General to act as"judge, jury and executioner" for daily fantasy sports in New York.
So is a player winning a daily fantasy sports contest contingent on an event not under their control? That will now be up to the New York Supreme Court to decide.
In addition to filing a lawsuit, FanDuel, said this morning saying that new deposits from users in New York will stop today.
The company said that all contests this week will run as scheduled, and all users in New York will still be able to withdraw their money as usual.
DraftKings so far has made no effort to stop accepting entries or deposits in New York, releasing a statement saying that the company "Will continue to operate in New York while we pursue all legal options available to prevent the New York Attorney General from denying our customers their right to play the games they love."
In a statement released yesterday, Schneiderman reiterated that "DraftKings and FanDuel are operating illegal sports betting websites under New York law, causing the same kinds of social and economic harms as other forms of illegal gamblingBecause both companies have refused to follow the law in our state, we will take action to enforce state law."

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