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Law360 (October 7, 2020, 6:02 PM EDT) -- Fantasy sports and gambling company DraftKings said Wednesday it has priced its public offering at nearly $1.7 billion, proceeds of which will be split between the company and certain selling shareholders, in a deal guided by Greenberg Traurig LLP, Sullivan & Cromwell LLP, White & Case LLP and Paul Hastings LLP.
DraftKings Inc. said in a statement that the offering is for a total of 32 million shares at $52 each, raising more than $1.66 billion. Half of those shares are being sold by DraftKings and the other half by certain investors, it said. DraftKings will only receive proceeds from the sale of its shares, which it said will be used for general corporate purposes.
The underwriters have a 30-day option to buy up to 4.8 million additional shares, which could raise nearly $250 million.
The follow-on offering comes a little more than a month after DraftKings said NBA legend Michael Jordan would serve as a special adviser to its board of directors in exchange for an equity stake in the company. The sides did not disclose the size of the equity stake acquired by the former Chicago Bulls superstar.
DraftKings went public in April after merging with blank-check company Diamond Eagle Acquisition Corp. The move was made even though DraftKings faced extreme headwinds in the form of financial difficulties and future uncertainty resulting from the coronavirus pandemic and the widespread cancellation or postponement of sporting events the pandemic caused.
The go-public plan was originally announced in December when DraftKings unveiled a three-way merger deal with Diamond Eagle and SBTech Ltd., which develops software for sports betting and casino gambling platforms. The resulting, combined company kept the DraftKings name.
While the offering of $52 per share is significantly higher than DraftKing's stock price of $19.35 per share when it began publicly trading on the Nasdaq on April 24, it's still a dip below the company's high of almost $64 per share Oct. 2 and its closing price Tuesday of almost $57 per share.
The selling stockholders include various DraftKings directors and executive officers, according to a filing with the U.S. Securities and Exchange Commission.
DraftKings said that although COVID-19 has resulted in an increase of revenue this quarter as a result of people spending more time at home, it cautioned that its business still depends on the continuation of professional sports seasons and that the end result of the pandemic is uncertain.
The company said it hasn't yet finalized financial results from the third quarter but expects to report revenue between $131 million to $133 million, an increase of 97% from the same period last year.
DraftKings also reported markedly higher response rates to its advertising and significantly more unique users compared to the third quarter of 2019.
"Our online sports betting handle for the three months ended September 30, 2020, is expected to have grown approximately 460% compared to the same period last year, including online sports betting handle growth in New Jersey of approximately 110%," the company said in the filing.
However, DraftKings cautioned that COVID-19 has had a significant impact on its business, including by the postponement and cancellation of professional sports games and seasons and that the end result of the pandemic remains uncertain.
The gambling company said it's also had to issue refunds for events and that some casinos using its brand remain closed or have limited its capacity.
"Our revenue continues to depend on major sports seasons and sporting events, and we may not generate as much revenue as we would have without the cancellation or postponements in the wake of COVID-19," it said.
A spokesperson for the company declined to comment Wednesday beyond its public statements.
Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. LLC are the lead underwriters for the offering.
DraftKings is represented by a Greenberg Traurig LLP team including John Jeppsen and Greg Cooper, as well as Scott Miller, Ronald Creamer Jr., Benjamin Kuder and Franklin Liu of Sullivan & Cromwell LLP.
The underwriters are represented by a White & Case LLP team including Joel Rubinstein, Jonathan Rochwarger, Elliott Smith, Sarah Ross and Jared Coppotelli, and a Paul Hastings LLP team including Behnam Dayanim and Holly Flynn were gaming regulatory counsel.
--Additional reporting by Elise Hansen, Mike Curley and Benjamin Horney. Editing by Stephen Berg.
Update: This article has been updated with additional counsel information for the underwriters and DraftKings.
For a reprint of this article, please contact reprints@law360.com.
