With DraftKings offer, PointsBet is suddenly a hot commodity
It appeared that a deal had been reached last month for Fanatics to purchase PointsBet’s U.S. assets for $150 million, but DraftKings threw a wrinkle into those plans a few days ago by offering PointsBet $195 instead. PointsBet’s board originally said that it was going to honor the original Fanatics deal, but yesterday they announced they would hear the last-minute offer by DraftKings and allow the shareholders of PointsBet to decide (undoubtedly after shareholders demanded they consider the offer).
The 30% higher offer by DraftKings is a cash offer and one that shareholders would almost certainly be in favor of, if the plan is to never return to the United States or to have any association with Fanatics moving forward. 
PointsBet’s board is still urging shareholders to accept the Fanatics offer, likely because they don’t want to appear as bad actors after they looked for new opportunities, but most financial analysts agree that it would be foolhardy for shareholders not to accept the higher offer which is debt free and not subject to any conditions. “What employee would agree to 30% less money just to save their boss’ reputation?” one financial analyst said to me. “This is no different because shareholders invest to maximize return for their portfolios.”
It’s fairly evident that DraftKings made the offer to slow down the entry of Fanatics into the market rather than actually having interest in PointsBet’s assets and customer base. After all, DraftKings is in every state that PointsBet currently operates and is always either the leading operator in the state or in second place behind FanDuel, while PointsBet lags far behind. 
But without the acquisition of PointsBet, Fanatics would have no immediate entrance to some of the 13 states that PointsBet currently operates, including New York, Michigan, New Jersey and Pennsylvania, which have rules that limit new entries to the market. Fanatics has said they want to make a splash in every state except New York, where they indicated it’s impossible to be profitable with the 51% tax rate. This could be a blessing in disguise for them in that state since Senator Joseph Addabbo Jr is encouraging the state to increase licenses in an effort to lower the tax rate to 35% based on the tax matrix, and if they do increase licenses it’s almost a certainty Fanatics would be one of the company’s being approved. Fanatics CEO Michael Rubin indicated that he believed that DraftKings’ offer was tainted and said in a statement that “they are using the majority of their projected year-end cash just to try and block us.” Aside from the purchase itself, any purchase of PointsBet also requires committing almost $250 million to a deal between PointsBet and NBC, which was just renegotiated for four more years. Jason Robbins, the CEO of DraftKings denied that the interest in PointsBet had anything to do with Fanatics and said that PointsBet simply represented “a compelling opportunity at a great valuation.”
It’s no secret that all of the larger sportsbooks fear Fanatics entry into the sports betting market given access to the massive customer base who buys their merchandise from them, along with Fanatics market valuation of $31 billion, which exceeds the valuation of DraftKings and Flutter Entertainment (the owner of FanDuel and PokerStars) combined. The companies also seem to fear BetFanatics’ CEO Matt King, who has been deemed one of the most innovative and marketing savvy people in the field and who is the person that brought the idea of Daily Fantasy Sports to prominence. So, it’s not surprising that DraftKings is doing whatever it can to impede the entry of Fanatics as long as possible in an effort to sign up as many people as they can before Fanatics can make their pitch for those same customers.
It is notable that the Canadian assets of PointsBet are not included in the deal and the reason was thought to be that Fanatics is not interested in Canada at this point. The possible reason for that is the rule that prohibits marketing for betting from other endeavors. At the SBC Canada conference, however, Scott Vanderwel, the CEO of PointsBet Canada said that the company is staying in Canada because they see a path to profitability. 
PointsBet has over 20,000 customers in Ontario and are growing, and unlike the U.S., they don’t have to make substantial other investments to make a mark. But unlike the United States, DraftKings is not a leading operator in Ontario, so a couple of analysts I spoke to said they wouldn’t be surprised if an unannounced agreement in the deal with DraftKings is the ability to acquire the Canadian assets of PointsBet at some later date, which would partially justify the 30% higher offer. PointsBet did try to sell its Australian assets last year, but backed out because the offer given to them was too low. It would be no surprise to see PointsBet simply dissolve itself of all world assets in the next year or two, which would be all the more reason for shareholders to take the additional money. Thus far it does not appear that Fanatics is prepared to up its offer for PointsBet and almost certainly will not meet the $195 million offered by DraftKings.
If PointsBet had been selling last year, it is unlikely DraftKings would have been able to make this offer, since DraftKing’s market cap dropped by almost half due to poorer than expected results. But the price has skyrocketed in 2023. DraftKings’ stock was worth just over $14 a share on June 22, 2022 and today is worth over $25 a share. So, with the number one goal likely being to beat Fanatics to the punch before that company launches its sports betting operations at the start of this year’s NFL season, DraftKings seems wiling to overpay believing in short term pain for long term gain.
So, they say all is fair in love and war and no doubt DraftKings sees Fanatics inevitable entry a battle they must win. PointsBet shareholders have until June 30th to decide which offer to take and unless the board can make a better argument to them than “we don’t want to look like poor negotiators as we seek new opportunities,” it is almost a certainty the shareholders will say they want the higher offer. The only questions at this point seems to be whether Fanatics will blink, and match DraftKings’ offer, and whether access to the international assets of PointsBet are a hidden part of the agreement.
By July 1st we’ll know for sure, but one thing is a guarantee – BetMGM, FanDuel, Barstool, BetRivers, Wynn etc., are almost certainly pulling for DraftKings to win the bid, because like DraftKings, they certainly fear Fanatics entry into the iGaming market as well.
Read insights from Hartley Henderson here at GamblersWORLD!
About Us
T&C
Privacy
Contact
Submit video