Shares of DraftKings (NASDAQ:DKNG) fell 6.1% on Wednesday after the sports betting company announced the pricing of its public offering.
A total of 32 million DraftKings shares will be sold, with the company selling 16 million and shareholders selling the rest. The offering is priced at $52 per share and is expected to raise more than $1.6 billion. Underwriters also have the option to purchase as many as 4.8 million additional shares in the next 30 days.
DraftKings is projected to raise more than $830 million from the shares it sells. The company plans to use the funds for general corporate purposes.
It makes sense that DraftKings is using the recent run-up in its share price to raise cash by selling stock. The fantasy sports and betting operator is ramping up its sales and marketing investments now that live sports have resumed following coronavirus-related stoppages. DraftKings said in its registration statement for the offering that it plans to spend as much as $210 million in the third quarter alone.
However, the price of the offering was 8% lower than the stock's closing price on Tuesday, and shares fell in kind. Moreover, several major shareholders -- including New England Patriots owner Robert Kraft -- are taking part in the share sale. When insiders sell, investors tend to take note.