Investors are thinking twice about pouring money into daily fantasy sports companies such as DraftKings as scrutiny by US state policymakers continues to intensify.
DraftKings’ latest round of funding reportedly raised about $70 million from investors, a sharp drop from previous investment rounds, said the Boston Globe.
According to two people briefed on the terms, investors did not assign a fixed valuation to the company in the most recent funding round, just like what happened in October when it raised $200 million.
The new investment round is also the one that prompted Twenty-First Century Fox Inc. to mark down the value of its $160 million investment in DraftKings by about 60%, “based on information concerning DraftKings’ current valuation in a recent financing transaction.”
Both privately-held DraftKings and FanDuel have yet to turn a profit, banking on hundreds of millions of dollars in outside investments from private equity firms and professional sports leagues to fund operations. DraftKings’ investors such as the Kraft Group, owners of the New England Patriots; Boston financial giant Wellington Management; Major League Baseball; the National Hockey League (NHL); and the owners of the New York Knicks, New York Rangers, Los Angeles Dodgers, and Dallas Cowboys have yet to disclose their stake with the company.
Aside from Fox, mutual funds owned by John Hancock Financial and Hartford Financial Services Group Inc. have also negatively revised the value of their stakes in DraftKings by about 15%, from $7.67 per share to about $6.52 per share.
This month, ESPN and DraftKings ended their exclusive advertising deal and FanDuel laid off 55 workers at its Orlando, Florida, office.
But DraftKings still believes the industry’s position is strong and the company does not have any intention to scale back operations.