Daily fantasy sports operator DraftKings has seen its valuation plummet by three-fifths since the industry came under closer legal scrutiny, according to a filing by one of its major investors.
In a 10-Q filing with the US Securities Exchange Commission on Tuesday, media conglomerate Twenty-First Century Fox Inc. reported that it had written off around $95m of the $160m stake it had taken in DraftKings – equal to about 11% of the company – in July 2015.
Fox said it had arrived at the nearly 60% devaluation of its stake “based on information concerning DraftKings’ current valuation in a recent financing transaction.” The statement implies that DraftKings was out trying to raise capital at deeply discounted rates from its two funding rounds earlier in 2015, before the roof caved in on the DFS sector.
According to DraftKings’ corporate records, the company’s most recent funding round raised $200m last August, two months before the ‘data leak’ scandal opened up the DFS bad news floodgates. At the time, DraftKings boasted a valuation of around $2b.
In filings stemming from its legal knife fight with New York attorney general Eric Schneiderman, DraftKings stated that the negative publicity has affected the company’s ability to attract new investment.
DraftKings also blamed Schneiderman for wrecking their relationships with financial institutions, including payment processor Vantiv Inc and (more recently) credit card colossus Citigroup, both of which have stated they want out of the DFS business (but only in New York, at least in Citigroup’s case).
DraftKings got a more neutral statement of intent from Paypal on Tuesday. ESPN scribe David Purdum (@DavidPurdum) quoted a Paypal spokesperson saying the company was continuing to “review and consider ongoing developments” in assessing its “position and obligations in relation to providing payment services” for DFS operators. Paypal promised to alert both operators and customers “if and when we make any decisions” affecting their options.
The entire DFS industry is currently on pins and needles awaiting Tuesday’s rendezvous with media destiny. The long awaited episode of PBS Frontline dealing with DFS — a joint investigation with the New York Times – airs Tuesday night, while CBS’s 60 Minutes Sports also chose Tuesday to air the results of its own DFS-themed investigation. Expect plenty of state and federal politicians to be especially shocked – shocked! – by Wednesday morning.
