DraftKings Stock Spikes Following ESPN Partnership Rumor

Posted on: October 6, 2022, 05:52h. 

Last updated on: October 6, 2022, 06:36h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

DraftKings (NASDAQ:DKNG) is one of Thursday’s after-hours winners, trading higher by almost 11% on speculation the sportsbook operator is nearing an exclusive arrangement with ESPN.

DraftKings ESPN
Disney CEO Bob Chapek delivering a speech to Disney World staffers. The company’s ESPN unit is said to be nearing a deal with DraftKings.(Image: Joe Burbank/Orlando Sentinel)

Bloomberg broke the story earlier this afternoon, citing unidentified sources familiar with the matter. This very likely is the substantial sports betting announcement Walt Disney (NYSE:DIS) CEO Bob Chapek recently teased.

Well, in terms of sports betting we have been in conversations for quite a long time now with a number of different platforms to add some utility to sports betting and take away some friction for that for our guests,” said Chapek in August on Disney’s most recent quarterly earnings conference call.

The structure of the DraftKings arrangement with the sports giant isn’t yet clear.

Speaking of DraftKings/ESPN Structure

Connecticut-based ESPN reached marketing deals with both Caesars Entertainment (NASDAQ:CZR) and DraftKings in 2020 and it hasn’t been revealed how the media company’s new accord with DraftKings will affect the casino operator, if at all.

There’s also speculation regarding how much DraftKings may be paying in the deal, stoking wonderment among industry observers regarding the stock’s blistering late-Thursday rally. Last year, ESPN was rumored to be seeking a $3 billion licensing pact with a sportsbook operator, and it’s believed the network held talks on that subject with Caesars and DraftKings.

Though Disney could easily afford to acquire DraftKings, an all-out takeover by the entertainment company is unlikely, owing to the fact that DraftKings CEO Jason Robins controls about 93% of the gaming company’s voting stock.

Disney owns six percent of DraftKings non-voting equity, which the entertainment conglomerate got via its 2019 $71.3 billion takeover of 21st Century Fox.

Disney Could Be Big Winner

Given its status as the most recognizable sports network in the US, and recent efforts to boost betting-related content, it’s clear ESPN wants to get a slice of the rapidly expanding sports wagering pie. It’s also likely the network doesn’t want to be involved in running a sportsbook and the regulatory process that comes with that business.

A more extensive partnership with DraftKings could benefit the sports network in another way. It’s possible that the gaming company is paying a hefty sum for the agreement, meaning Disney has cash coming in, not going out in the name of sportsbook acquisition.

The California-based media giant could direct some of that capital to further bolstering sports wagering content and the fast-growing ESSP+ streaming service.

Rumors of the expanded DraftKings/ESPN relationship surface less than a month after activist investor Dan Loeb — a Disney shareholder — relented in his push for an ESPN spinoff, which was partially rooted in the notion a separation would allow the broadcaster to better capitalize on sports betting opportunities.