DraftKings Inc. (Nasdaq: DKNG) (“DraftKings” and the “Company”)
today announced that it has reached an agreement to acquire
Jackpocket, the leading lottery app* in the United States, for
total consideration of approximately $750 million, with
approximately 55 percent of the consideration payable in cash
funded from the Company’s balance sheet with no capital raise
required and approximately 45 percent of the consideration payable
in the Company’s Class A common stock, subject to customary
purchase price adjustments and the collar mechanism described below
(the “Proposed Transaction”).
Jackpocket is the leading provider of digital
lottery services in the U.S. with proprietary and highly-scalable
technology, a strong brand, and an outstanding founder-led
management team. The Proposed Transaction will enable DraftKings to
access and grow into the massive U.S. lottery industry, but more
importantly strengthen its position in Sportsbook and iGaming
through higher customer lifetime value – based on demonstrated
cross-sell capabilities – and an enhanced customer acquisition
engine.
“We are very excited to enter the rapidly
growing U.S. digital lottery vertical with our acquisition of
Jackpocket,” said Jason Robins, Co-founder and CEO of DraftKings.
“This transaction will create significant value for DraftKings not
only by giving our customers another differentiated product to
enjoy but also by improving our overall marketing efficiency
similar to how our daily fantasy sports database created an
advantage for DraftKings in OSB and iGaming.”
“Together with DraftKings, we will be able to
bring tremendous value to our customer base as we advance our
mission to create a more convenient, fun, and responsible way to
take part in the lottery,” said Peter Sullivan, CEO of Jackpocket.
“DraftKings’ broad footprint and exceptional mobile products
present an opportunity to meaningfully expand the digital lottery
vertical, and we could not be more excited to come together with
DraftKings.”
Transaction Financial
Impact
Conservatively assuming no additional OSB and
iGaming legalization in the U.S., DraftKings expects the Proposed
Transaction to drive $260 million to $340 million of incremental
revenue and $60 million to $100 million of incremental Adjusted
EBITDA in fiscal year 2026. On the same basis, assuming no
additional OSB and iGaming legalization in the U.S., DraftKings
expects the Proposed Transaction to drive $350 million to $450
million of incremental revenue and $100 million to $150 million of
incremental Adjusted EBITDA in fiscal year 2028.
Details of the Transaction
Under the terms of the merger agreement entered
into on February 11, 2024 (the “Merger Agreement”), Jackpocket
stockholders will receive total consideration of approximately $750
million on a fully diluted basis, consisting of approximately
$412.5 million in cash, subject to certain customary purchase price
adjustments, and approximately $337.5 million in the Company’s
Class A common stock, subject to the collar mechanism described
below.
The stock consideration will be subject to a
collar pursuant to which a variable number of shares of DraftKings’
Class A common stock will be issued to Jackpocket stockholders in
order to deliver a value of approximately $337.5 million, so long
as the 30-trading-day volume weighted average price of DraftKings’
Class A common stock as of the second trading day immediately
preceding the closing of the Proposed Transaction (the “Closing
Stock Price”) remains between $31.68 and $42.86. In the event that
DraftKings’ Closing Stock Price is above $42.86 or below $31.68,
Jackpocket stockholders will receive a fixed number of
approximately 7,874,806 shares or approximately 10,654,149 shares,
respectively, of DraftKings’ Class A common stock, representing
approximately 2% of the outstanding shares of DraftKings' Class A
common stock.
The Merger Agreement and the Proposed
Transaction have been approved by the Boards of Directors of each
of DraftKings and Jackpocket, as well as Jackpocket’s
stockholders.
The Proposed Transaction is subject to the
receipt of required regulatory approvals and other customary
closing conditions and is expected to close by the second half of
2024. Additional details and information about the terms and
conditions of the Proposed Transaction are included in a Current
Report on Form 8-K, filed by DraftKings with the Securities and
Exchange Commission (the “SEC”).
DraftKings’ top priority is stewarding safe and
responsible play. This core tenet aligns closely with Jackpocket as
a fellow member of the National Council on Problem Gambling
(“NCPG”). Jackpocket is certified for responsible gaming through
NCPG’s assessment program (iCAP), and both DraftKings and
Jackpocket provide tools and resources to encourage responsible
gaming behavior, including spending and funding limits as well as
self-exclusion. DraftKings believes the Proposed Transaction will
enable the Company to safely and responsibly expand the lottery
category, generating more revenue for states to fund important
programs.
Advisors
Goldman Sachs & Co. LLC served as exclusive
financial advisor to DraftKings, and Sullivan & Cromwell LLP
served as legal counsel to DraftKings. The Raine Group served as
exclusive financial advisor to Jackpocket, and Cooley LLP served as
legal counsel to Jackpocket.
About DraftKings
DraftKings Inc. is a digital sports
entertainment and gaming company created to be the Ultimate Host
and fuel the competitive spirit of sports fans with products that
range across daily fantasy, regulated gaming and digital media.
Headquartered in Boston and launched in 2012 by Jason Robins, Matt
Kalish and Paul Liberman, DraftKings is the only U.S.-based
vertically integrated sports betting operator. DraftKings’ mission
is to make life more exciting by responsibly creating the world’s
favorite real-money games and betting experiences. DraftKings
Sportsbook is live with mobile and/or retail sports betting
operations pursuant to regulations in 26 states and in Ontario,
Canada. The Company operates iGaming pursuant to regulations in
five states and in Ontario, Canada under its DraftKings brand and
pursuant to regulations in three states under its Golden Nugget
Online Gaming brand. DraftKings’ daily fantasy sports product is
available in 44 states, certain Canadian provinces, and the United
Kingdom. DraftKings is both an official daily fantasy and sports
betting partner of the NFL, NHL, PGA TOUR, and UFC, as well as an
official daily fantasy partner of NASCAR, an official sports
betting partner of the NBA and an authorized gaming operator of
MLB. In addition, DraftKings owns and operates both DraftKings
Network and Vegas Sports Information Network (VSiN), to provide a
multi-platform content ecosystem with original programming.
DraftKings is committed to being a responsible steward of this new
era in real-money gaming with a Company-wide focus on responsible
gaming and corporate social responsibility.
About Jackpocket
Jackpocket is on a mission to create a more
convenient, fun, and responsible way to participate in the lottery.
The first licensed third-party lottery app in the United States,
Jackpocket provides an easy, secure way to order official state
lottery tickets. Jackpocket is currently available in Arizona,
Arkansas, Colorado, Idaho, Massachusetts, Minnesota, Montana,
Nebraska, New Hampshire, New Jersey, New Mexico, New York, Ohio,
Oregon, Puerto Rico, Texas, Washington D.C., and West Virginia.
*Jackpocket was downloaded 9x more than its
closest competitor in the digital lottery app category in fiscal
year 2023 according to Sensor Tower estimates.
No Offer or Solicitation
This communication is not intended to and shall
not constitute an offer to buy or sell or the solicitation of an
offer to buy or sell any securities, or a solicitation of any vote
or approval, nor shall there be any offer, solicitation or sale of
securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction. No offer of
securities shall be made in the United States absent registration
under the U.S. Securities Act of 1933, as amended, or pursuant to
an exemption from, or in a transaction not subject to, such
registration requirements.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995, including statements about the
Company, Jackpocket and their respective industries that involve
substantial risks and uncertainties. All statements, other than
statements of historical fact, contained in this press release,
including statements regarding guidance, DraftKings’ and
Jackpocket’s consummation of the Proposed Transaction and future
results of operations or financial condition, strategic plans and
focus, user growth and engagement, product initiatives, and the
objectives and expectations of management for future operations
(including launches in new jurisdictions and the expected timing
thereof), are forward-looking statements. In some cases, you can
identify forward-looking statements because they contain words such
as “anticipate,” “believe,” “confident,” “contemplate,” “continue,”
“could,” “estimate,” “expect,” “forecast,” “going to,” “intend,”
“may,” “plan,” “poised,” “potential,” “predict,” “project,”
“propose,” “should,” “target,” “will,” or “would” or the negative
of these words or other similar terms or expressions. DraftKings
cautions you that the foregoing may not include all of the
forward-looking statements made in this press release.
You should not rely on forward-looking
statements as predictions of future events. DraftKings has based
the forward-looking statements contained in this press release
primarily on its current expectations and projections about future
events and trends, including the current macroeconomic environment,
that it believes may affect its and Jackpocket’s business,
financial condition, results of operations, and prospects. These
forward-looking statements are not guarantees of future
performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside DraftKings’ and Jackpocket’s
control and that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements.
Important factors, among others, that may affect actual results or
outcomes include, but are not limited to, the outcome of any legal
proceedings that may be instituted against DraftKings and
Jackpocket following the announcement of the Merger Agreement and
the Proposed Transaction; the inability to complete the Proposed
Transaction, including due to failure to obtain the requisite
approvals of applicable regulatory authorities or the failure to
satisfy certain other conditions to closing in the Merger
Agreement; the occurrence of any event, change or other
circumstance that could give rise to the termination of the Merger
Agreement or could otherwise cause the Proposed Transaction to fail
to close; the risk that the Proposed Transaction disrupts current
plans or operations as a result of the announcement and
consummation of the Proposed Transaction; the ability to recognize
the anticipated benefits of the Proposed Transaction, which may be
affected by, among other things, competition and the ability of
DraftKings and Jackpocket to grow and manage growth and retain its
key employees; costs related to the Proposed Transaction;
DraftKings’ and Jackpocket’s abilities to execute their respective
business plans and meet their respective projections; potential
litigation involving DraftKings or Jackpocket; changes in
applicable laws or regulations, particularly with respect to online
gaming, digital lottery courier or similar businesses; general
economic and market conditions impacting demand for DraftKings’ and
Jackpocket’s products and services; economic and market conditions
in the media, entertainment, gaming, lottery and software
industries in the jurisdictions in which DraftKings and Jackpocket
operate; global conditions and economic factors, as well as the
potential impact of general economic conditions, including
inflation, rising interest rates and instability in the banking
system, on DraftKings’ and Jackpocket’s liquidity, operations and
personnel, as well as the risks, uncertainties, and other factors
described in “Risk Factors” in DraftKings’ filings with the SEC,
which are available on the SEC’s website at www.sec.gov. Additional
information will be made available in other filings that DraftKings
makes from time to time with the SEC. The forward-looking
statements contained herein are based on the DraftKings
management’s current expectations and beliefs and speak only as of
the date hereof, and neither DraftKings nor Jackpocket makes any
commitment to update or publicly release any revisions to
forward-looking statements in order to reflect new information or
subsequent events, circumstances or changes in expectations, except
as required by law.
Non-GAAP Financial Measures
This press release includes Adjusted EBITDA,
which is a non-GAAP financial measure that DraftKings uses to
supplement its results presented in accordance with U.S. generally
accepted accounting principles (“GAAP”). The Company believes
Adjusted EBITDA is useful in evaluating its operating performance,
similar to measures reported by its publicly-listed U.S.
competitors, and regularly used by security analysts, institutional
investors and other interested parties in analyzing operating
performance and prospects. Adjusted EBITDA is not intended to be a
substitute for any GAAP financial measure, and, as calculated, may
not be comparable to other similarly titled measures of performance
of other companies in other industries or within the same
industry.
DraftKings defines and calculates Adjusted
EBITDA as net income (loss) before the impact of interest income or
expense (net), income tax provision or benefit, and depreciation
and amortization, and further adjusted for the following items:
stock-based compensation; transaction-related costs; litigation,
settlement and related costs; advocacy and other related legal
expenses; gain or loss on remeasurement of warrant liabilities; and
other non-recurring and nonoperating costs or income.
DraftKings includes non-GAAP financial measures
because they are used by management to evaluate the Company’s core
operating performance and trends and to make strategic decisions
regarding the allocation of capital and new investments. Adjusted
EBITDA excludes certain expenses that are required in accordance
with GAAP because they are non-recurring items (for example, in the
case of transaction-related costs and advocacy and other related
legal expenses), non-cash expenditures (for example, in the case of
amortization of acquired intangible assets, depreciation and
amortization, remeasurement of warrant liabilities and stock-based
compensation), or non-operating items which are not related to the
Company’s underlying business performance (for example, in the case
of interest income and expense and litigation, settlement and
related costs).
Information reconciling forward-looking fiscal
year 2026 Adjusted EBITDA and fiscal year 2028 Adjusted EBITDA to
its most directly comparable GAAP financial measure is unavailable
to DraftKings without unreasonable effort due to, among other
things, certain items required for such reconciliation being
outside of DraftKings’ control and/or not being able to be
reasonably predicted. Preparation of such reconciliation would
require a forward-looking balance sheet, statement of income and
statement of cash flow, prepared in accordance with GAAP, and such
forward-looking financial statements are unavailable to the Company
without unreasonable effort. DraftKings provides a range for its
Adjusted EBITDA forecast that it believes will be achieved;
however, the Company cannot provide any assurance that it can
predict all of the components of the Adjusted EBITDA calculation.
DraftKings provides a forecast for Adjusted EBITDA because it
believes that Adjusted EBITDA, when viewed with DraftKings’ results
calculated in accordance with GAAP, provide useful information for
the reasons noted above. However, Adjusted EBITDA is not a measure
of financial performance or liquidity under GAAP and, accordingly,
should not be considered as an alternative to net income (loss),
gross profit, or cash flow from operating activities or as an
indicator of operating performance or liquidity.
Contacts
Media:Media@DraftKings.com@DraftKingsNews
Investors:Investors@DraftKings.com
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