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Is This a Buying Opportunity for DraftKings?

By Jose Najarro – Sep 22, 2021 at 11:15AM

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DraftKings' stock price dropped over 5% in one day after online reports of an acquisition.

Today's video focuses on recent news affecting DraftKings (DKNG 1.24%) and its proposed offer to acquire Entain (ENT 0.07%), causing considerable volatility in stock prices for these two online betting companies. Online reports indicate that the acquisition offer is roughly $20 billion, almost the size of DraftKings' current market cap. Here are some highlights from the video: 

  1. Entain is a global market leader with numerous product offerings like sports betting and casinos and is focusing on new growth opportunities within its industry. If the acquisition goes through, it could accelerate DraftKings' international growth drastically. 
  2. MGM Resorts International (MGM 0.91%) currently has an exclusive partnership with Entain in the U.S online sports betting and online gambling market. Due to this partnership, MGM must agree with any transaction Entain has with a competing business, complicating things for DraftKings. 
  3. During an acquisition, the stock price of the company doing the acquiring tends to drop. There could be numerous reasons for this. First, for investors to be willing to sell their ownership, they would have to be getting more than what the company is currently worth. Second, the company making the purchases will either have to use cash, build debt, dilute shares, or all of the above. 

Click the video below for my full thoughts and analysis. 

*Stock prices used were the midday prices of Sept. 21, 2021. The video was published on Sept. 21, 2021.


 

Jose Najarro owns shares of DraftKings Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Jose is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

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Stocks Mentioned

DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$15.51 (1.24%) $0.19
Mgm Resorts International Stock Quote
Mgm Resorts International
MGM
$37.20 (0.91%) $0.34
Entain Stock Quote
Entain
ENT
$1,403.00 (0.07%) $1.00
Golden Nugget Online Gaming Stock Quote
Golden Nugget Online Gaming
GNOG

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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