DraftKings Stock, Already Slumping, Faces Another Lockup Expiry

Posted on: January 4, 2021, 06:18h. 

Last updated on: January 4, 2021, 06:36h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

DraftKings (NASDAQ:DKNG) stock is staring at the possibility of more selling pressure as soon as Tuesday with another lockup period expiring. The stock is in the midst of an almost 14 percent slide over the past week.

DraftKings stock
DraftKings advertised on the outside of the Nasdaq market site. There’s concern the stock will fall amid another lockup expiration. (Image: Twitter)

Last October, the Boston-based daily fantasy sports (DFS) provider and sportsbook operator sold 20.8 million shares of equity in a secondary offering to raise cash. That announcement coincided with the expiration of the company’s first lockup period. In a regulatory filing issued at that time, shareholders selling into the stock sale agreed to not further reduce their stakes until 90 days after Oct. 5. That time period ends tomorrow.

The agreement ceasing Tuesday covers 64 million shares of DraftKings, primarily held by high-ranking executives and early investors.

The expiration will increase the amount of shares available to trade by more than 20 percent,” according to Bloomberg data.

At the close of US markets today, there were 355.90 million DraftKings shares outstanding.

Timing Could Be Better

The online sports wagering company went public last April. Newly public companies usually have six-month freezes during which founders, executives, early investors, and employees receiving equity-based compensation cannot sell shares.

While it’s been on the receiving end of plenty of enthusiasm in the analyst and investment communities, DraftKings stock hasn’t recovered from the October share sale and lockup expiration. Early that month, the shares peaked at $64.19, only to enter November around $35. The stock briefly traded above $55 in December, but is off 12.21 percent over the past month. With Monday’s 3.65 percent decline, the name resides 30.11 percent below its all-time high.

Regulatory filings indicate DraftKings founders Matthew Kalish, Paul Liberman, and Jason Robins were buyers during the October secondary, which could be a sign they may look to trim their stakes tomorrow. Robins, the company’s chief executive officer, is one of the operator’s largest shareholders and the biggest owner of the Class B stock, which carries with it 10 votes per share.

Two prior expired lockups resulted in declines of 0.40 percent and 4.6 percent for DraftKings stock.

Sellers Remain to Be Seen

It’s not immediately clear who will reduce DraftKings positions tomorrow. But the company has a star-studded investor roster, including New England Patriots owner Robert Kraft, board member Shalom Meckenzie, John Salter, and Raine Group.

Those shareholders previously reduced stakes in the DFS company. But Walt Disney and Legend Hospitality — a consortium controlled by the Dallas Cowboys and New York Yankees — didn’t part with DraftKings equity.

Twenty-five analysts cover the stock, 15 of which have bullish or very bullish ratings on the name. The consensus price target is $60, implying upside of roughly 33 percent from the Jan. 4 close, though one research firm has a $100 forecast on DraftKings.