DEAC Filing to Clear DraftKings for Nasdaq Listing Reveals Shareholders, Other Merger Details
Diamong Eagle Corp /DEAC/, the Special Purpose Acquisition Company /SPAC/ created for the merger between DraftKings and SBTech, announced last week its shareholders approved the deal that involved the Boston-based fantasy and sports book operator and the European technology provider.
Subsequently, this meant that since Friday, April 24, DraftKings started trading on the NASDAQ as the only vertically-integrated sports betting and online gaming company based in the US. But it also meant DEAC should file with the Securities and Exchange Commission /SEC/, the exchange regulatory body, some registration documents.
The Walt Disney Company Among the Shareholders
Schedule 13G filed under the Securities Exchange Act, 1934, revealed one of the significant shareholders of the newly-formed entity is The Walt Disney Company, owning 6% of the company’s stock. In March 2019, The Walt Disney Company acquired 21st Century Fox in a deal worth $71.3 billion. As part of that deal Disney acquired a stake in DraftKings, due to Fox’s 2015 $160 million investment into the Boston-based fantasy sports provider.
The multinational mass media and entertainment company is classified as a passive investor, a classification that prevents Disney from investing into DraftKings’ competitors, but also shows the media giant sees long-term potential for its investment in the gaming company.
DraftKings’ Loss, SBTech’s Profit
Another detail revealed in the prospectus filed by DEAC to the SEC is that DraftKings registered $114.1 million loss for the first 9 months of 2019. Despite posting 44.3% jump in revenues for the period, to $192 million, DraftKings’ direct costs skyrocketed by 143.5%, to $64.7 million, leading to an operating loss of more than $115 million, a 52% rise year-on-year.
The new betting technology provider for DraftKings that is set to replace Kambi, SBTech, registered profit for the period, $36.5 million, despite having its revenue down 6.7% year-on-year, to $76.8 million, which was more than offset by the 18.6% drop in direct costs, to $40.2 million.
Indemnification Provisions
Another interesting detail revealed to the SEC is that Diamond Eagle is expecting some legal repercussions from the recent cyber-attack on the database servers of SBTech. In March, the betting technology provider had to shut down its operations to all of its 50 B2B global partners, as a protective measure for its data centres, which apparently were under a cyber-attack.
The document revealed that all parties agreed to create an escrow fund of $10 million from the amount due to be received by SBTech that will be held for 2 years in case of any future indemnification claims. Another $20 million of Class A shares for SBTech and its option holders will be locked down, also for 2 years.
In case these turn out to be insufficient to satisfy potential claims, the new DraftKings will be entitled to use the other SBTech’s indemnification provisions, $25 million cash escrow and $45 million of stock.
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