Daily fantasy sports giant, DraftKings soon (perhaps) to become an even more gigantic DraftKings-FanDuel, has achieved another $100m in financing, despite its pending merger not yet finding favour with the relevant authorities.
The company appealed for capital through its most recent fundraising round “Series E1”, although the $100m achieved in this round is only adding to a cash pile of $780m already raised through similar routes.
Despite the bullish behaviour, the tabled merger between the two most dominant firms in the US Daily Fantasy Sports market is still far from certain, leaving some analysts to surmise the financing is in fact a hedge against the mergers being denied.
The deal still sits with the US Justice Department and Federal Trade Commission for clearance. Yet considering the newly formed entity would control an unforetold 95 percent of the USA’s DFS market, the tie-up being disapproved is by no means an outside possibility.
According to Forbes sources, FanDuel has been raising capital through separate channels – almost as if both companies are operating under the assumption that the deal will not be granted.
If the deal fails and they fail to raise the finance, the two companies are likely to be faced with significant operational difficulties, the source said.
DraftKings however remains coy about such motives. “We were looking for a funding partner who could bring additional depth to the table,” said DraftKings CEO Jason Robins.
The two companies announced their intent to merge last year, in the wake of overlapping marketing costs, less than anticipated user growth and potential threat that regulators may look to redefine the genre. Yet antitrust remains a major headwind.
As platforms predicated on facilitating peer-to-peer competition, DFS firms rely on “network effects” that can form a blocker to new market entrants – a characteristic of which competition authorities are keenly aware.