Why Is DraftKings Stock Rising Today: Should I Buy?

The online betting leader can’t keep itself out of the headlines after DraftKings confirmed its acquisition of Golden Nugget on Monday.

Aug. 9, 2021

Shares in DraftKings (NASDAQ: DKNG) rose in pre-market trading on Monday after its latest acquisition announcement.

In an all-stock deal worth an implied equity value of approximately $1.56 billion, the online betting company has acquired Golden Nugget Online Gaming, Inc. (NASDAQ: GNOG). Golden Nugget Online Gaming (GNOG) was part of the wider Golden Nugget, Inc. and Fertitta Entertainment family, and specializes in iGaming, or online gambling. 

What does DraftKings get from GNOG? 

Just days after announcing a lucrative partnership with Genius Sports (NYSE: GENI), DraftKings can now gain access to the brand power of Golden Nugget, as well as its database of 5 million active users.

What’s more, the connection with Fertitta Entertainment has opened up a commercial agreement between the two. Fertitta is the parent company of the Houston Rockets, Golden Nugget, LLC and Landry’s LLC, and a leader in the gaming, restaurant, hospitality, and sports entertainment industry. DraftKings now has access to all of these commercial properties via the relationship. 

What does DraftKings’ leadership think?

In the words of CEO Jason Robins:

“Our acquisition of Golden Nugget Online Gaming, a brand synonymous with iGaming and entertainment, will enhance our ability to instantly reach a broader consumer base, including Golden Nugget’s loyal ‘iGaming-first’ customers. This deal creates meaningful synergies such as increased combined company revenues driven by additional cross-sell opportunities, loyalty integrations and tech-driven product expansion as well as technology optimization and greater marketing efficiencies. We look forward to Tilman being an active member of our Board and one of our largest shareholders.”

What can shareholders expect from DraftKings’ Golden Nugget acquisition? 

Aside from the brand awareness and user data, there is a more obvious financial incentive behind the deal. Synergies are expected to ramp up to $300 million at maturity, while the partnership will cut DraftKings’ market access rates through preferred pricing with Golden Nugget-owned properties. 

There is more to it: 

  • Cross-promotion strategies should boost revenue as it leads to a better iGaming experience, which will also expand the company’s userbase. 
  • DraftKings’ technology-first approach will drive product enhancement through expanded offerings, including in-house live dealers, and an improved consumer-driven experience.
  • Cheaper and more efficient methods of cross-selling on Fertitta-owned franchises as well as more customer VIP access. 

So, should I buy DraftKings?

DraftKings has more than its fair share of competitors, so any growth opportunities like this are a bonus. The company has been busy with deals and acquisitions over the past year, which can put a dent in its cash flow. However, if this is what it takes to be at the forefront of the growing online gambling industry in the U.S., then it’s a risk it needs to take.

For the more risk-averse investor, this new industry may need to grow some more, but DraftKings could be one of Wall Street’s next big millionaire-makers.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.