DraftKings Goes Public

Daily sports wagering company DraftKings will be going public in 2020 in an unusual way. DraftKings will complete a merger with the publicly traded blank check company Diamond Eagle. Since Diamond Eagle is already publicly traded, DraftKings will become publicly traded after the merger without having to file all of the necessary SEC paperwork associated with a traditional IPO. DraftKings will also purchase sports betting technology company SBTech for $300 million, with the financing for this acquisition from institutional investors.

Bill.com's Partial Adjustment

When Bill.com filed for it's IPO in November, the indicated price range was $16-$18. Earlier this week, the company raised the range to $19-$21, before settling on $22. When the IPO hit the market yesterday, the price jumped 61 percent. The company raised $215.6 million, but apparently left about $131 million on the table. Whether that comes back to haunt the company is yet to be seen: Sales increased about 60 percent from the previous year, but losses have also increased.

Grade Time!

As many of you are aware, it is that time of year for grades. And while we hope you earned an A, it appears that many companies haven't. The inaugural American Corporate Governance Index was released and only 16 percent of companies received an A- or better. Ten percent of companies failed. The worst average grade was a C- for Principle 8, which requires a company to regularly evaluate its system of corporate governance and commit to addressing deficiencies. The next lowest grade was given for Principle 4, which requires companies to maintain strategies focuses in long-term performance and value. Looks like more studying is needed.

TIme Value Of Money And Baseball

In case you missed it, two days ago, Steven Strasburg signed a record 7-year, $245 million contract to pitch for the Washington Nationals. One day later, Gerrit Cole signed a 9-year, $324 million contract to pitch for the New York Yankees. As we discuss in the textbook, many sports contracts are actually paid out longer than is stated. You need the time value of money to properly evaluate such contracts. For example, Bruce Sutter signed a then record 6-year, $9.1 million contract with the Atlanta Braves in 1984. While this works out to a little over $1.5 million per year, Sutter was actually paid only $750,000 per year in interest for the six years of the contract. The rest of the money was paid as a deferred annuity. Sutter last pitched in 1988, but, in 2022, he will receive his last annuity payment. Importantly, note that it was believed at the time that a one-time payment of $1.7 million would have funded the annuity.