DraftKings Stock Slides After Massachusetts Senate Rejects Sports Betting Plan
Posted on: July 30, 2020, 10:15h.
Last updated on: July 30, 2020, 01:13h.
DraftKings (NASDAQ:DKNG) stock traded lower Thursday, extending a slide that’s seen the name give up almost five percent over the past week. That’s after the Massachusetts State Senate balked at the inclusion of a sports wagering proposal included in a broader economic development package.
That’s a stinging rebuke for DraftKings in its own backyard. The company was founded and is based in Boston. Shares of the sportsbook operator were lower by as much as 3.5 percent earlier in today’s session. But those losses were trimmed with the stock lower by 1.23 percent at this writing.
H.4879, An Act Enabling Partnerships for Growth, contained provisions for legalizing sports wagering in the Bay State. It recently sailed through the state House, but the Senate stripped the sports betting component, essentially ending any chance Massachusetts will legalize betting on sports in 2020.
Still, some analysts, as they mostly have since DraftKings went public in late April, remain bullish on the stock.
While the Senate’s failure to legalize sports wagering removes a near-term positive catalyst, we are still optimistic sports betting will get legalized in Massachusetts next year,” said Morgan Stanley analyst Thomas Allen.
Massachusetts is the largest state in New England and viewed as the holy grail of sports betting opportunities in the region. Of the six states in the area, only New Hampshire and Rhode Island currently allow sports wagering.
Penchant for Political Sensitivity
DraftKings isn’t the only gaming offender on the Massachusetts Senate news. Penn National Gaming (NASDAQ:PENN), the operator of the Plainridge Park Casino (PPC), is also trading lower today.
While the daily fantasy sports (DFS) juggernaut clawed back much of its intraday loss seen earlier Thursday, today’s price action in DraftKings stock reminds investors that the thesis regarding increased state-level legalization of sports betting cuts both ways.
This year, market participants appear comfortable bidding online casino and sportsbook operator equities higher. That’s based on speculation more states will approve one or both of those endeavors to raise cash following the coronavirus pandemic. The risk is, as Massachusetts highlights, when things don’t go the operators’ way, investors pay the price.
DraftKings has barely more than three months as a public company under its belt, and the stock is already showing it’s politically sensitive. Last month, the stock slipped after a bill that would have paved the way for online sports betting in California in 2023 was scrapped.
Earlier this week, online sportsbook equities, including DrafKings, were dinged when Illinois resumed the requirement of in-person registration for mobile betting sites, a mandate that will force Chicago-area gamblers to drive hundreds of miles to complete that registration.
Not a Lost Cause
The good news for DraftKings, Penn, and others wanting Bay State sports betting licenses is that the issue isn’t dead.
Morgan Stanley’s Allen believes the recent sports betting effort suffered from bad timing and poor structure in the way it was proposed. That’s not because the Massachusetts Senate opposes the idea. He believes the state will pass sports betting early next year.
Other experts believe its possible sports wagering is approved there later this year, and that it will be spring 2021 when the first legitimate bets are placed.