DraftKings, the high-flying sports betting company, has been hit with a reality check.
Shares of the newly public company tumbled as much as 14% Monday after two Major League Baseball games were postponed because of coronavirus outbreaks.
The postponements, which come just days into the long-delayed season, highlight the enormous challenges facing the sports world and the gambling industry that relies on it. As an online sports and fantasy gambling company, DraftKings’ near-term success is inextricably linked to the fate of this experiment.
That was clear in MLB’s announcement Monday, and the stock’s slide as a result. Games scheduled for Monday night between the Baltimore Orioles and Miami Marlins, as well as the New York Yankees and Philadelphia Phillies, were postponed because of coronavirus infections among players and staff.
DraftKings (DKNG), which went public in April through a “blank check” company, was an instant hit on Wall Street despite the sports vacuum that was already in effect.
And even after Monday’s drop, DraftKings’ share price has spiked more than 200% on the year, giving the company a valuation of more than $13 billion.
In a statement, DraftKings praised the sports leagues for “taking this process seriously and making decisions based on what’s best for the health of their teams.”
“While our business in the short term is partially dependent on the sports calendar,” a DraftKings spokesperson said, “we have always said we are playing the long game and will continue our focus on driving a technology-first approach to product innovation in order to keep sports fans engaged.”
The pandemic has forced DraftKings to rely on alternatives. For instance, DraftKings allowed people to bet on Russian table tennis and even hosted simulations of Madden NFL video games.
Investors had been betting the return of professional baseball and the NBA later this week would be a boost for DraftKings and the gambling industry.
Other gambling related stocks also dipped Monday, including MGM Resorts (MGM), Boyd Gaming (BYD) and Penn National Gaming (PENN). Casino owner Penn National in January purchased a 36% stake in Barstool Sports, which plans to launch a sports betting app in September to compete with DraftKings.
CNN Business’ Paul R. La Monica contributed to this report.