- General
- March 19, 2021
- 5 minutes read
DraftKings Taps Bond Market To Raise $1.2B
After wrapping up 2020 with soaring revenues, sports betting company DraftKings has sought to capitalize on the cheerful investor attention…
After wrapping up 2020 with soaring revenues, sports betting company DraftKings has sought to capitalize on the cheerful investor attention towards it that’s sent its stock soaring over the past year to raise $1.15 billion by selling convertible bonds on the public markets.
DraftKings has announced a proposed offering of $1.15 billion in convertible notes split into $1 billion upfront for investors and an additional $150 million optional allotment for the banks underwriting its bond issue.
- DraftKings will sell $1 billion of convertible notes upfront and grant its underwriters a 13-day option to purchase an additional $150 million. Convertible notes are basically bonds that can be converted into stocks by their owners.
- DraftKings’ convertible notes are priced at 0% interest and due by 2028. The notes won’t be redeemable by DraftKings at its will before 2025. For conversion to DraftKings’ stock at a bondholder’s will, the notes have an initial conversion rate of 10.5430 shares of Common Stock per $1,000 principal amount of Notes, equivalent to $94.85 per share.
- Frankly, that DraftKings is selling a seven-year-bond at 0% interest speaks of a current frothy US equities market with lots of capital flying around. It’s then no surprise that many tech stocks have soared over the past year, even in the midst of the Covid-19 pandemic that had significant crippling economic effects.
DraftKings already has ample cash reserves of $1.8 billion before the bond sale meaning it’s issuing new notes to buffer up its cash coffers. With its cash reserves summing up to around $3 billion after the bond sale, speculations have come up that DraftKings will use it to make a big acquisition.
Rumors have flown around that DraftKings could be bidding to acquire Canadian sports betting and media company TheScore as well as poker company Run It Once and ESPN’s X Games.
With its cash reserves, DraftKings is also likely to bump up its marketing spend. Acquiring new customers has been crucial to sports betting companies and more so as several states in the US have moved to legalize sports betting and open up a new stream of customers in the process.
DraftKings has had a fantastic time on the public markets with its stock soaring nearly six-fold over the past year. The company commands a market cap of $28 billion and recently saw its CEO vault into billionaire territory courtesy of its soaring market cap.
