It takes money to make money – DraftKings posts $348 million loss
DraftKings is proving the old business adage that it takes money to make money by losing nearly $350 million in Q3 2020. But those losses are hardly the harbinger of a failing business. In fact, DraftKings is gaining value at a rapid clip and is certainly a contender in the sweepstakes to dominate the newly opened regulated US sports betting market.
Word of DraftKings big loss came via the company’s official Q3 reports that are filed with the US Securities and Exchange Commission (SEC). But the filings include some pretty reasonable explanations and a strong argument for big profits in the future.
A big chunk of DraftKings’ Q3 was the result of a major $203 million dollar sales and marketing blitz aimed at harvesting new players from the lucrative US regulated sports betting market. This kind of airwave blanketing is exactly what the company did back when it was a daily fantasy sports site and had no interest in sports betting.
Of course DraftKings, like every other sportsbook on the planet, benefited from the return of live sports. In an investors call, reported on by LegalSportsReport, Jason Robins, DraftKings’ CEO commented on the situation saying, “The resumption of major sports such as the NBA, MLB and the NHL in the third quarter, as well as the start of the NFL season, generated tremendous customer engagement.”
All those new players will eventually play off this round of bonuses and DraftKings will be positioned well to have a long and very profitable relationship with them. Investors have heard this message loud and clear and drove the compay’s stock price up 10 percent to $45 a share.