DraftKings Backs Out Of PointsBet Deal: Oppenheimer Analyst Forecasts Potential For Fanatics In OSB Market

Oppenheimer analyst Jed Kelly reiterated an Outperform rating on the shares of DraftKings Inc DKNG.

Earlier in the day, the company announced that the company is no longer pursuing the acquisition of the U.S. business of PointsBet Holdings Ltd.

PointsBet board unanimously recommended shareholders vote for Fanatics Betting and Gaming's (FBG) improved proposal to acquire PBH’s U.S. business for $225 million (up from $150 million), and 15% above DKNG’s $195 million proposal. DKNG subsequently announced that it is no longer pursuing the deal.

The analyst saw DKNG’s $195 million offer implying PBH's U.S. segment was undervalued at $150 million, but more importantly, acknowledged the potential for well-capitalized Fanatics to become a larger player in OSB.

According to the analyst, Fanatics was early in its OSB rollout and Pointsbet will accelerate its product offering, especially in the ability to make more markets and develop a better UX design.

The analyst expected FBG to be live in key states by NFL season but is not expecting a material near-term competitive impact for DKNG into football.

Smaller operators lacking a large base of active users, have lower UX quality, cannot implement targeted promotions, and are unable to execute national brand campaigns will be most at risk of initially ceding share to Fanatics, added the analyst.

Price Action: DKNG shares are trading lower by 0.13% at $25.92 on the last check Wednesday.