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Why DraftKings Was Trouncing the Market on Tuesday

By Eric Volkman – Aug 24, 2021 at 3:53PM

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The company enters the micro-betting arena with a new collaboration.

What happened

Online sports gambling specialist DraftKings (DKNG 6.09%) was a good bet for investors on Tuesday. In midafternoon trading, the company's stock was up by nearly 6% on the back of a deal it announced that morning.

So what

DraftKings' arrangement is with a privately held company called Simplebet, a specialty tech company that facilitates micro-betting -- i.e., wagers on individual plays within a sporting event.

Person stands in stadium while holding a fistftul of cash.

Image source: Getty Images.

Under the terms of the deal, Simplebet's products will be offered to DraftKings customers for Major League Baseball, National Football League, and National Basketball Association games, plus a myriad of college football contests. 

In its press release trumpeting the deal, DraftKings quoted its president of global product and technology, Paul Liberman, as saying, "We’re excited to be working with Simplebet to change the in-game betting experience for our customers and, together, changing the way sports fans engage with their favorite sports."

DraftKings did not provide any details as to the financial particulars of the arrangement.

Now what

Assuming the terms of the deal are more or less reasonable, it feels like an obvious win-win for both DraftKings and the up-and-coming Simplebet. It deepens the former company's offerings and makes them "stickier" to the die-hard sports gambler willing to bet on a particular at-bat or field goal attempt. 

That said, we should bear in mind that while DraftKings has come a long way as a company, it still has quite a few challenges to surmount. A major one is its consistent lack of profitability; no matter how many sweet deals it might sign, investors will expect bottom-line surpluses sooner rather than later.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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DraftKings Inc. Stock Quote
DraftKings Inc.
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