DraftKings Approaches Acquisition of Simplebet for $120M-$170M

DraftKings is reportedly nearing the acquisition of micro-betting provider Simplebet, according to multiple sources cited in the Earnings+More newsletter. The deal is expected to be valued between $120 million and $170 million, marking a significant move in DraftKings’ strategy to enhance its micro-betting offerings.

DraftKings which already holds a 15% stake in Simplebet from a partnership initiated in 2021, introduced real money micro-betting on its platform.

Simplebet has established partnerships with other major operators, including Hard Rock Bet.

However, the financial complexity of this deal arises from the expected sale price, which might fall below Simplebet’s $210 million valuation from a 2021 Series C funding round.

Impressive Growth in Betting Volume

This week, Simplebet announced that its betting volume and total handle have more than doubled since the start of the current MLB season. From early April to mid-May, the New York-based company processed over seven million bets, a figure more than double that of the same period last year. This surge in betting volume has been accompanied by a 120% year-over-year increase in handle, largely driven by a 115% rise in unique s compared to the previous year. Simplebet attributes these gains to a growing demand for in-play betting and micro markets.

DraftKings’ Aggressive Expansion in 2024

This potential acquisition follows a series of strategic moves by DraftKings in early 2024. Recently, DraftKings acquired odds maker Sports IQ Analytics for an estimated $50 million to $70 million, though specifics of the deal were not disclosed. Additionally, DraftKings completed a significant $750 million acquisition of lottery courier Jackpocket. This acquisition is expected to enhance DraftKings’ customer acquisition capabilities and allow the company to tap into the U.S. lottery market.

During a subsequent earnings call, DraftKings CEO Jason Robins emphasized the value of Jackpocket’s customer database and the potential for cross-selling. Robins highlighted that online lottery players are more likely to engage in other gaming verticals such as sports betting and iGaming. DraftKings projects that this acquisition will contribute up to $340 million in incremental revenue and up to $100 million in incremental adjusted EBITDA by the 2026 fiscal year.

Strategic Rationale and Industry Impact

The acquisition of Simplebet would further bolster DraftKings’ capabilities in the micro-betting space, complementing the recent acquisition of Sports IQ. While Sports IQ brings player props capabilities, Simplebet offers robust micro-markets architecture, creating a synergistic potential for DraftKings’ offerings.

However, integrating the two technological platforms presents a challenge. Experts have mixed opinions on whether DraftKings will successfully merge these capabilities. One industry insider remarked, “That will be the tricky part,” highlighting the complexities involved in the integration process.

Despite these challenges, the acquisition is seen as a strategic move for DraftKings, given the growing importance of specialized odds provision and trading capabilities. Recent industry trends have seen significant M&A activity, such as PointsBet’s acquisition of Banach Technology and Entain’s purchase of Angstrom. With few B2B providers remaining, Simplebet’s acquisition positions DraftKings advantageously in a competitive market.

Source:

“DraftKings ‘closes in’ on Simplebet”, earningsandmore.substack.com, May 24, 2024.