scorecardresearch Skip to main content

DraftKings faces multiple hurdles after $22 billion deal falls apart

Rivals grew faster in sports betting during the pandemic

Jason Robins, chief executive and cofounder of DraftKings, in 2020.Marco Bello/Bloomberg/file

DraftKings’ chief executive Jason Robins has set his sights on dominating the future of online gambling, saying last summer he’d like to become the Amazon of his industry.

But the CEO’s big ambitions suffered a setback on Tuesday after he dropped a $22.4 billion takeover offer for UK rival Entain, to be paid mostly in DraftKings stock. In a filing, DraftKings said it would not make a firm offer to buy Entain after talks broke down. The deal would have added not just Entain’s online gaming operations around the world but also its two chains of UK betting parlors.


Few expect the setback to curb Robins’s appetite for deal-making. Last year, the CEO led the acquisition of Bulgarian betting-software developer SBTech and merged DraftKings with a blank check company in a combined deal to go public valued at $5.9 billion. And in August, casino chain Golden Nugget agreed to sell its online gaming business to DraftKings for $1.6 billion.

“Given the company’s track record over the past 10 years, I would expect them to do more acquisitions,” analyst Jed Kelly, who follows the company for Oppenheimer & Co., said. “That’s what they do.”

In a statement announcing the end of the Entain offer, Robins emphasized that DraftKings remains in a strong position even without the acquisition. “Based on our vertically-integrated technology stack, best-in-class product and technology capabilities and leading brand, we are highly confident in our ability to maintain a leadership position and achieve our long-term growth plans in the rapidly growing North America market,” the CEO said.

DraftKings said Robins and other executives were not available for interviews as they prepare to report quarterly earnings next week.

The entire episode seems to have shaken confidence in DraftKings, which was already facing a loss of market share in some key markets and allegations of misdeeds from one of Wall Street’s leading short-selling firms. The company’s stock had dropped about 18 percent since the Entain deal was disclosed in September and regained only 4 percent on Tuesday after the effort was abandoned.


Critics fretted that DraftKings made the bid, which exceeded its market value by billions of dollars, because it was worried about growing competition from Entain’s US online-betting partnership with MGM, or perhaps lacked confidence in its current technology platform.

“We are not surprised by this outcome, because we viewed this deal as just too complicated to close from the start,” analyst Joseph Greff at J.P. Morgan wrote in a report on Tuesday. “What remains unanswered to us, at least, is why DraftKings launched this in the first place.”

With Entain now off the table, Robins can search for other acquisitions but also needs to fend off a Securities and Exchange Commission investigation into DraftKings’ disclosures around its blank check merger. In June, short-selling firm Hindenburg Research alleged that SBTech might be violating anti-gambling laws in China and other countries, sparking the inquiry. DraftKings has denied any wrongdoing.

DraftKings also found out during the pandemic just how critical it is to have cutting-edge technology in its betting apps. The company’s older systems couldn’t offer one of the most popular betting formats for sports fans this year, a wager known as same-game parlays.

That’s when a bettor ties together multiple wagers on a single game by, for example, betting the Patriots will beat the Chargers but be behind at halftime and that the teams will score more than 48 points combined in the game. To win, the bettor has to get all three bets correct. By tying the bets together in a same-game parlay, the bettor gets a chance at a much larger payout.


Analysts say the lack of such parlays led to an erosion of DraftKings’ market share until it finally added the feature this summer.

DraftKings’ share of the US sports-betting market dropped from 32 percent in March 2020 to 21 percent in July of this year before rebounding, with the company’s new betting options, to 30 percent in August, according to research firm Eilers & Krejcik Gaming. At the same time, DraftKings’ share of online gambling in traditional casino games has grown from 9 percent in March 2020 to 14 percent in August 2021.

With the parlays added, the company is now better placed to compete.

“The question of who will be the single largest player in the US remains an open one,” Chris Grove, a partner at Eilers & Krejcik, said. “But DraftKings is clearly still among the select group of companies with a legitimate shot at taking that crown.”

Aaron Pressman can be reached at Follow him @ampressman.