DraftKings stock slumps 14% on doomed outlook for California sports betting
DraftKings shares sank 13.82% yesterday after the Wall Street Journal reported that leading online operators have all but given up on campaigning for online sports betting in California.
DraftKings and US market leader FanDuel fronted a coalition of US operators that have spent a fortune in marketing and lobbying on promoting Proposition 27 ahead of November’s ballot vote.
Proposition 27 would legalise online sports betting in the state, which is the biggest and wealthiest in the US. It would be transformative for the TAM of US sports betting companies.
However, hopes of Prop 27 passing have been fading fast.
Recent polls have all forecast it failing, while its cause has not been helped by Proposition 26, which would legalise brick-and-mortar betting for local tribes.
Last week, a poll conducted by Cal Berkeley’s Institute of Governmental Studies concluded that 53% of Californians planned to vote no to Prop 27.
It appears Prop 26 is not faring much better, with recently published figures showing support for the bill at just 31%, with 42% of voters opposed and 27% still undecided.
Indeed, online operators and the tribes have spent millions of dollars to tear each side’s proposition apart, which has complicated the situation and bemused Californians.
The online initiative led by DraftKings and FanDuel has spent more than $400m to date, but the WSJ said the campaign has recently cancelled around $11m in broadcast TV ads they had planned to run through Election Day in November.
This could be the first public sign of the operators admitting defeat – for this year, at least.
Investors duly took note and sold DraftKings stock, which dropped to $14.28 per share.
This rounded off a volatile period for the stock, which soared 12.8% on 6 October after Bloomberg reported DraftKings was close to a major sports betting partnership with ESPN.