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Michael Jordan gets equity stake in DraftKings, stock surges

·3 min read
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DraftKings announced on Wednesday morning it has added NBA legend Michael Jordan as a special advisor to its board, in exchange for an equity stake in the company.

Investors cheered the news by sending the stock up nearly 13% in pre-market trading.

Jordan, currently chairman and majority owner of the Charlotte Hornets, is known to be a big gambler and looks like a good fit for a company that made its name as a leader in daily fantasy sports (DFS) but has rapidly launched sports betting operations in states that have passed new legislation since 2018, when the U.S. Supreme Court struck down the federal ban on sports betting.

Jordan will “provide strategic and creative input to the board of directors on company strategy, product development, inclusion, equity and belonging, marketing activities and other key initiatives,” DraftKings said in a statement.

Note the mention of “inclusion” in that list. As the NBA and WNBA continue to lead other pro sports leagues in encouraging its athletes to speak out on social issues, DraftKings wants to take the right steps in that arena as well.

DraftKings CEO Jason Robins, in a statement, said that Jordan “is among the most important figures in sports and culture, who forever redefined the modern athlete and entrepreneur. The strategic counsel and business acumen Michael brings to our board is invaluable, and I am excited to have him join our team.”

Investors may wonder whether Jordan’s advisory role is just the first step toward him eventually joining the company’s board. DraftKings cofounder and president Matt Kalish, in an interview with Yahoo Finance, threw cold water on that possibility for the time being: “I think we are all reticent that as a team owner, there’s some guidelines that have to be adhered to there... We’re going to start with the deal we have and get as much out of that as possible.” (NBA team owners are not expressly prohibited from serving on the board of a gaming company.)

Basketball - NBA - Charlotte Hornets v Milwaukee Bucks - AccorHotels Arena, Paris, France - January 24, 2020   Charlotte Hornets owner Michael Jordan during a pre match press conference   REUTERS/Benoit Tessier
Basketball - NBA - Charlotte Hornets v Milwaukee Bucks - AccorHotels Arena, Paris, France - January 24, 2020 Charlotte Hornets owner Michael Jordan during a pre match press conference REUTERS/Benoit Tessier

The DraftKings-Jordan deal has shades of Papa John’s and Shaquille O’Neal last year. Shaq joined the company’s board, bought nine franchises, and became the new face of its brand, which isn’t the case with Jordan (yet), but it has worked wonders for Papa John’s.

DraftKings was taken public on April 24 by merging with an already-public SPAC (special purpose acquisition company), and the stock quickly surged, even amid a global pandemic with live sports shut down. Shares are up more than 100% since then.

With the return of the NBA season, DraftKings and its competitor FanDuel, along with other betting apps like Bet365, have returned to running high volumes of television ads. The start of the NFL season, set to kick off on Sept. 10, is typically the most crucial time of year for these companies, when they sign up the most new users.

But DraftKings and FanDuel also got some very bad news last month when the IRS issued guidance suggesting it believes DFS contest entry fees count as wagers, and thus fall under the existing excise tax on sports betting. The tax would be 0.25% of the amount of every contest fee. The companies are expected to challenge the decision in court.

Daniel Roberts is an editor-at-large at Yahoo Finance and closely covers sports business. Follow him on Twitter at @readDanwrite.

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