Sports betting company DraftKings fell by as much as 10% during Friday’s trading after it reported a larger-than-expected loss for the second quarter of 2020 and even after its revenues exceeded expectations.
Effect of COVID-19 Shutdown
The Boston-based gambling company posted a loss of $164.1M for the second quarter, or 55 cents per share which is steeper than the $28.11M loss, or 15 cents per share, which it reported for the same period last tear. Analysts polled by Dow Jones pegged the expected loss to be at 20 cents per share.
DraftKings’ losses emerged as the COVID-19 pandemic continues to bring havoc to sports. Professional and collegiate league schedules have been derailed and games have been suspended as athletes and fans have been forced to stay at home.
Most sporting events were suspended in mid-March, meaning the top professional sports leagues like the NBA, MLB, and NHL were forced into a hiatus during the second quarter of 2020. Recently, NCAA college leagues like the Big 10 and Pac 12 have also announced the cancellation of their respective seasons due to concerns about the coronavirus.
The NBA, MLB, and NHL have since returned and DraftKings says it has seen a revenue boost. But aside from that, the company said that it is focused to deliver new and innovative offerings that will lead to healthier financial figures as sports continues to gradually resume. Said CEO and co-founder Jason Robins:
“In the second quarter, while several major sports leagues including the NBA, MLB and the NHL remained on hiatus due to COVID-19, the Company worked creatively to engage fans with new fantasy sports and betting products for NASCAR, golf, UFC, and European soccer.”
DraftKings also announced its full 2020 outlook, revealing that it expects a pro forma revenue of $500M to $540M, which is an equivalent of 22% to 37% growth for the second half of the year. In its report, the company reported $1.2B in cash and no debt on its second quarter balance sheet.
DraftKings went public last April after it combined with special purpose acquisitions company Diamond Eagle Acquisition Corp. and gaming technology provider SBTech. The move allowed DraftKings to circumvent the typical processes for initial public offerings.