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Why DraftKings Stock Plunged 8.2% Today

By Travis Hoium – Updated Sep 21, 2021 at 5:04PM

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DraftKings may be interested in buying a big competitor.

What happened 

Shares of online gambling stock DraftKings (DKNG -0.88%) fell as much as 8.2% in trading on Tuesday after reportedly making an offer to acquire global competitor Entain (ENT -1.61%). Entain's shares jumped over 20% on the report, but investors didn't like the move from DraftKings quite as much. 

So what

CNBC reported this morning that DraftKings is offering about $20 billion for Entain, which has a 50/50 partnership with MGM Resorts (MGM 0.77%) in the U.S. called BetMGM. Entain and MGM had some discussions about an acquisition earlier this year, but those were reportedly rebuffed by Entain. 

Person betting on sports game at a bar.

Image source: Getty Images.

The offer is huge considering that Entain is a big player in the European gambling market, and DraftKings is a leader in the U.S. Any acquisition is complicated by the MGM partnership, which includes a clause that says MGM would have to consent to a deal including U.S. operations. MGM has already said that it will engage with Entain and DraftKings if needed. 

Now what

Jockeying continues in the world of online gambling. Combining DraftKings and Entain could create a global juggernaut, but the question marks come in for U.S. operations. MGM doesn't seem likely to give up its U.S. operations to DraftKings and may not consent to a deal at all. It's also possible MGM acquires the U.S. portion of Entain's business, and DraftKings adds Entain to get into more international markets. Given that these are just early reports, we don't know what management has in mind, but clearly, investors aren't happy with DraftKings making such a big move today. 

Travis Hoium owns shares of MGM Resorts International. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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