DraftKings PointsBet Bid Proves Their Willingness to Spend

• Fanatics entered into an agreement with PointsBet US to acquire the company for $150 million in an effort to grow in the legal sports betting industry.
• DraftKings entered the mix weeks later, placing a bid of $195 million in cash to acquire PointsBet US.
• DraftKings’ negative net profit margin shows their willingness to spend regardless of the company’s goals for profitability.

BOSTON – Last week, DraftKings joined the game in an attempt to purchase PointsBet US. With the belief that Fanatics was in control to acquire their technology and players, DraftKings upped the ante by $45 million, bringing the total acquisition bid to $195 million.

But this is a normal situation for DraftKings, who have shown their willingness to spend regardless of the cost or future profitability goals.

Over the last three years, DraftKings has involved themselves in many bidding wars, advertising, and legal sports betting lobbying.

DraftKings Spending

• Potential PointsBet US Acquisition: $195,000,000
• California Prop 27: $34,104,050.10
• Florida Initiative #21-13: $22,871,479.00
• VSIN acquisition: $70,000,000
• Golden Nugget acquisition: $1,500,000,000
• 30-second Super Bowl advertisement: $6,500,000
• 2021 customer acquisition: ~$1,000,000,000

Is It Profitable?

With these only being a few examples of DraftKings spending in the sports betting industry, the spending makes many believe they are controlling the market.

Increasing their spending every year, the company’s gross profit increased along with their operating expenses.

Still, DraftKings net profit margin as of March 31, 2023, is -50.42%. Usually, this is a sign that a company cannot control costs or overspend in relation to what they bring in.

As DraftKings makes up roughly 25% of the US sports betting market size, the potential to get back on track is possible. As some see the potential PointsBet US acquisition as another major spend, others see it as pricing out the competition.

Because Fanatics has the ability to make another offer, DraftKings theoretically raised the entry prize for a different legal sportsbook, pushing back their opposition’s profitability goals.

The ship won’t end here though. DraftKings mentioned their desire to grow the iGaming field in the US – a costly endeavor that has just begun.

“On the iGaming side, we’re a little bit ahead of [FanDuel], I think plus or minus,” said Jason Robins, DraftKings CEO. “I think we’re roughly in line but a little bit behind BetMGM. So we want to be number one across the board.”

While nobody knows the future, DraftKings did lay off * 3.5% of their workforce in February -similar to many technology companies.