Federal antitrust regulators yesterday sued to block the proposed merger of fantasy sports sites DraftKings and FanDuel, leaving the two companies scrambling to decide whether to fight as partners or go their separate ways as rivals. As we wait, Axios has obtained a 106-page merger document circulated by FanDuel to its investors back in January, which includes company financials, valuations, risks and post-merger structures.
The jaw-dropping stat: Remember when every other ad during the 2015 NFL season was for fantasy sports? DraftKings lost over half a billion dollars that year.
Here are the highlights:
DraftKings audited GAAP financials:
2013 revenue: $4 million
2013 operating loss: $12 million
2014 revenue: $30 million
2014 operating loss: $75 million
2015 revenue: $89 million
2015 operating loss: $509 million
2016 (Jan-Sept) revenue: $92 million
2016 (Jan-Sept) operating loss: $103 million
Update: DraftKings emailed Axios to say its full-year 2016 revenue was $160 million with an operating loss of $92 million.
FanDuel audited GAAP financials:
2016 revenue (Jan-Oct): $91 million
2016 EBITDA loss (Jan-Oct): $59 million
Cash on hand at end of 2016: $30 million
Axios note: DraftKings raised over $100 million in new equity funding after this document was published. FanDuel also was in talks to raise new capital at the time, but a source says that those talks were later shut down as the company felt it had enough cash on hand to close the merger without accepting extra dilution. Now, however, those discussions may need to be reopened.
Valuation:
FanDuel says that its fully-diluted equity valuation was $1.2 billion, for purposes of the merger.
This would imply the same $1.2 billion valuation for DraftKings, given that the tie-up is repeatedly referred to in the document as a "merger of equals" — in terms of both voting rights and economic entitlements.
Transaction timeline:
Second half of 2015: Informal meetings between FD and DK management teams.
April 2016: Companies form special negotiating committees.
May 2016: Companies enter into non-binding letter of intent for a "merger of equals."
November 2016: Transaction agreement signed.
Why a merger of equals?
"The committees acknowledged that the two businesses are volatile, with significant seasonality and regulatory risk, and that both have different seasonal patterns due to differing marketing arrangements and sports coverage, which makes it difficult to measure accurately and compare the businesses at any particular point in time."
Pertinent risk factor, in light of FTC action:
"If completion of the Transaction does not occur, the value of FanDuel Shares as well as the FanDuel Group's ongoing business may be adversely affected, including as a result of (i) having to pay certain non-recurring transaction costs relating to the Transaction (including legal, advisory, accounting and other professional fees), and (ii) having to devote significant attention and resources of the management of FanDuel to the Transaction, instead of pursuing other business opportunities that could have been beneficial to the FanDuel Group."
Board structure: Were the merger to complete, the new company's board of directors would have nine members:
3 shareholder reps for FanDuel: L Andrin Bachmann (Piton Capital), Michael LaSalle (Shamrock Capital), Ted Oberwager (KKR)
3 shareholder reps for DraftKings: John Salter, (Raine Group), Hany Nada (GGV Capital) and Ryan Moore (Atlas Venture).
CEO, chairman and independent director
Also: Some existing shareholders such as the NBA and 21st Centuty Fox would have had indefinite board observer rights. Some other existing shareholders, namely Google Capital and Revolution Growth, would only have had board observer rights for a single year.
Both FanDuel and DraftKings initially declined comment when contacted by Axios, although DraftKings later provided its full-year 2016 revenue and operating loss.
Rahm Emanuel: Impeachment isn't "a political tool"
Photo: Scott Olson/Getty Images
At an Axios event in Chicago yesterday, Mayor Rahm Emanuel told me midterm Democratic candidates are unwise to rely on the allure of impeaching President Trump as an issue in November's races.
His advice: "I lived through the Clinton White House. This is a serious legal and constitutional, not political, issue. ... I couldn't be angrier at Donald Trump. ... That said, you don't just flippantly say: We're for [impeachment]."
"When we get to it, we collectively as a country will know it — as we did with, like, Richard Nixon."
"[Y]ou don't just treat ... the policy standard of impeachment ... as a political tool. It's a constitutional standard and, when that standard has been met, we'll know about it. ... This is a case where the best politics is good policy."
The backdrop: The N.Y. Times reported that Republicans are trying to energize their base and lure moderate voters by warning that Dems "will immediately move to impeach President Trump if they capture the House."
Liberal N.Y. Times columnist Charles Blow bluntly spells out the politics of impeachment: "It is quite possible that trying to impeach and remove Trump could have the opposite effect than the one desired: It could boost rather than diminish his popularity and an acquittal by the Senate would leave an even more popular president in office."
P.S. Rahm's big idea for governments ... One of the most common complaints to Chicago's 311 hotline is streetlights being out, and Mayor Emanuel told me the city is converting 270,000 sodium bulbs, one by one, to an LED smart grid model:
Some neighborhoods can be brighter or dimmer.
Why it matters: "Governments [need] to get where private sector is — being able not just to throw out mass information, but target residents, residents be able to communicate back ... It's a part of modernizing government services and making them more personal, more direct."