DraftKings ignites $1bn debt capital raise
US heavyweight to use funds for corporate purposes including M&A and product technology investments
DraftKings will look to bolster its coffers by more than $1bn (£720m) via a capital raise.
The US sports betting heavyweight will try to raise these funds via a private offering of convertible senior notes targeting institutional investors.
A senior convertible note is a debt security that contains an option where the note will convert into a predefined number of shares. These notes take priority over all other debt securities that the company may have issued.
In this case, these convertible senior notes are due to be repaid in eight years’ time.
Upon conversion, investors have an option to receive cash, Class A common stock shares or a combination of both.
DraftKings will allow institutional investors to exercise a 13-day option to purchase additional notes up to a total value of $150m.
In a statement, DraftKings confirmed that net proceeds from the offering will be used for working capital and general corporate purposes.
“This may include mergers and acquisitions and products or technology investments that DraftKings may identify in the future,” DraftKings added.
Speaking during the operator’s 2021 Investor Day last week, CEO Jaosn Robins said it was considering bolt-on acquisition opportunities in media and global expansion.
“Bolt-on is a good way to describe one the areas we’re looking at and global expansion is one area that might be of interest,” he said.
“Media is another area that might be of interest.
“There’s a lot of build versus buy analysis so it’s more opportunistic than anything else and if we see good opportunities emerge we’re going to go after them, but we’re also going to stay very disciplined and only do deals if they are the right ones,” he added.
DraftKings has said it intends to use a portion of the net proceeds generated from this capital raise to pay costs arising from several so-called capped call transactions with institutional investors participating.
Capped call transactions are used to reduce dilution to DraftKings common stock when notes are converted and to offset any cash payments the operator may be required to make more than the principal amount of converted notes, with that reduction subject to a cap.
Last month, DraftKings raised its revenue guidance for the 2021 financial year to up to $1bn from a prior estimate of $750m to $850m.