DraftKings withdraws gaming tax surcharge plan
In a recent development, DraftKings Inc. (NASDAQ:), a company known for its digital sports entertainment and gaming, has announced that it will not proceed with the implementation of a gaming tax surcharge. This decision was disclosed in a Form 8-K filing with the U.S. Securities and Exchange Commission on Wednesday, August 14, 2024, reflecting an event that took place on Tuesday, August 13, 2024.
The Boston-based company, which operates under the jurisdiction of Nevada, had previously considered adding a surcharge to its gaming operations. However, the latest filing indicates a change in direction. The reasons behind this decision have not been elaborated upon in the filing and the company has not filed the information as an admission of materiality.
DraftKings, with its headquarters at 222 Berkeley Street, Boston, MA, has been a significant player in the online betting and fantasy sports market. The company’s shares are traded on The Nasdaq Stock Market LLC under the symbol DKNG.
The 8-K filing serves to inform investors and the market of the company’s latest operational decisions. It is important to note that the information provided in the filing is not to be considered “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor is it incorporated by reference in any filing under the Securities Act, unless specifically referenced in such filings.
DraftKings’ Chief Legal Officer and Secretary, R. Stanton Dodge, signed off on the report, ensuring the company’s adherence to the regulatory requirements of the Securities Exchange Act of 1934.
This announcement comes as the industry continues to navigate the complex regulatory landscape that governs gaming and online betting. While the details regarding the considerations that led to this decision remain undisclosed, DraftKings’ withdrawal from the surcharge plan is now official information available to shareholders and the public. The company’s actions will continue to be observed by investors and market analysts as it adapts to regulatory and market demands.
In other recent news, DraftKings has been navigating several developments in the online betting industry. Needham recently reiterated its Buy rating on DraftKings, discussing the company’s strategy to focus on live betting for the upcoming NFL season and its pivot on the high tax rate surcharge. DraftKings’ second quarter performance saw a significant 80% increase in first-time depositors and a 40% reduction in customer acquisition costs.
Simultaneously, analysts from Truist Securities, Morgan Stanley, Oppenheimer, and Stifel have adjusted their price targets for DraftKings, citing reasons such as changes in profit and loss dynamics and upcoming high-tax surcharges. Despite the adjustments, all firms maintain a Buy or Overweight rating on the stock.
DraftKings has reported significant growth in both customer acquisition and revenue. The company’s recent quarterly report showed an impressive 80% increase in new Online Sports Betting (OSB) and iGaming customers year-over-year and a 26% rise in revenue, reaching $1.104 billion. Moreover, the company reduced its marketing costs by over 40% and announced a share repurchase program of up to $1 billion.
DraftKings also announced the smooth progression of the Jackpocket integration, expecting a positive adjusted EBITDA from the acquisition in fiscal year 2025. The company revised its EBITDA expectations for fiscal year 2024 to $340 million to $420 million, primarily due to an increase in the Sportsbook tax rate in Illinois. However, DraftKings maintains its adjusted EBITDA forecast of $900 million to $1 billion for fiscal year 2025.
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