Shares in sports-betting business DraftKings jumped on Wednesday after announcing that ex-NBA superstar Michael Jordan has signed on as a board advisor
I’m not sure if I can squeeze any more basketball puns into this article than I already have in the headline, and perhaps I shouldn’t try. However, it’s not every day that a major betting company gets a major celebrity endorsement, never mind one into the boardroom as an advisor.
And it’s not just any celebrity that DraftKings (NASDAQ: DKNG) has gotten on board; it’s arguably the greatest basketball player of all time — though my colleague Mike would vehemently disagree — Michael Jordan.
What role will Jordan play at DraftKings?
Other than shooting guard at the corporate basketball tournament, Jordan has accepted an advisory role on the board of the sports betting company. Jordan, a member of the National Basketball Association Hall of Fame, is expected to offer DraftKings his expertise on sports company strategy, product development, diversity, equity and belonging, marketing activities, and other key initiatives, according to the release.
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What does MJ bring to the company?
I already made the corporate basketball tournament joke, right? Michael Jordan is probably the United States’ most revered athlete still alive today and his popularity is at all-time highs once more following Netflix and ESPN’s ‘The Last Dance’ docuseries, which was released back in April.
This clever move has already shown its merit as DraftKings saw its stock rise more than 8% on Wednesday following the surprise announcement.
Although we don’t know how much MJ is being paid and what the immediate financial impact of the move might be, by associating its brand with such a superstar, DraftKings could be pulling off what Nike also did with the former Chicago Bulls player, and what it currently does with the likes of Cristiano Ronaldo, Tiger Woods, and LeBron James.
The move also offers DraftKings the opportunity to work even closer with the NBA, as its most prolific son ties his legacy in with the gambling company. This legacy will go a long way in validating the only very recent legalization of online sports betting, especially as more states in the U.S. seek to legalize the practice.
What has DraftKings said on the matter?
Well, if you take the word of CEO Jason Robins, he couldn’t be happier to get the six-time NBA championship winner in on the action.
“Michael Jordan is among the most important figures in sports and culture, who forever redefined the modern athlete and entrepreneur,” Robins said in a press release. “The strategic counsel and business acumen Michael brings to our board is invaluable, and I am excited to have him join our team.”
What’s more, a spokesperson for the NBA commented on the move, stating that “NBA team investors, including governors, are permitted to have involvement with sports betting and fantasy sports businesses, subject to safeguards required under league rules to prevent actual or perceived conflicts of interest.” So I guess that’s a lot of red tape cut through from the get-go.
Does this make DraftKings a solid investment?
It’s very hard to make any rational decisions in the stock market so far this year given the madness of March’s pandemic-driven lows, followed by the meteoric recovery that followed and is still ongoing. DraftKing investors have been very bullish since its reverse-merger with Diamond Eagle Acquisition Corp. brought it public this year, with its stock up 106% since it started trading on April 24.
Before going public with this merger, it was worth $780 million; it is now worth roughly $13 billion.
The company is still not profitable, losing $161.4 million ($0.55 per share) in Q2, but considering the current sporting environment in the time of COVID, its revenue still grew to $70.9 million in the same period, with DraftKings also boasting $1.2 billion in cash and no debt on its balance sheet.
As sports come back (hopefully) and begin getting audiences back, the betting industry could well take off, but for now we need to wait and see.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.