In a significant move that’s set to reshape the landscape of online gaming and lottery services, DraftKings has announced its acquisition of the online lottery courier service, Jackpocket. This $750 million deal marks a pivotal moment for both companies and the broader online gaming industry, signaling DraftKings’ ambitious expansion into the U.S. lottery market.
The Deal: A Closer Look
DraftKings, a leader in online sports betting and gaming, has agreed to purchase Jackpocket, a company that has made waves by making it easier and more fun for people to participate in the lottery. The acquisition, valued at approximately $750 million, is a mix of cash and stock. DraftKings will pay 55% of the acquisition cost, or $412.5 million, in cash from its balance sheet. The remaining 45%, or about $337.5 million, will be paid in common stock.
This strategic move is part of DraftKings’ broader strategy to dive into the U.S. lottery market and enhance its offerings in online games and sports betting. By integrating Jackpocket’s services, DraftKings aims to provide a more comprehensive and engaging experience for its users.
Jackpocket’s Impact and Expansion
Since its launch in Massachusetts, Jackpocket has expanded its operations to 15 other states, Puerto Rico, and Washington D.C. The service acts as a courier, allowing age-verified users to order official state lottery tickets, which are then purchased on their behalf at licensed retailers. This model has made participating in the lottery more accessible and convenient, aligning with the growing trend of digitalization in gaming and betting.
The CEO of Jackpocket has expressed optimism about the deal, believing that the partnership with DraftKings will significantly expand the digital lottery vertical. This expansion is expected to be driven by DraftKings’ broad footprint and innovative mobile products, which have already seen rapid success following the legalization of sports betting in Massachusetts in August 2022.
Shared Values and Future Projections
Both DraftKings and Jackpocket prioritize safe and responsible play. They are members of the National Council on Problem Gaming (NCPG) and actively promote responsible gambling practices. This shared commitment to responsible gaming is a cornerstone of their partnership.
Financially, DraftKings anticipates this acquisition to generate between $260 million to $340 million in incremental revenue for the fiscal year 2026. Projections for fiscal year 2028 are even more optimistic, with expected incremental revenue ranging from $350 million to $450 million and $100 million to $150 million in incremental adjusted EBITDA.
The merger has received approval from both companies’ Boards of Directors and Jackpocket’s stockholders. The deal is expected to close by the end of 2024, marking a significant milestone in the evolution of online gaming and lottery services.
Analysts Perspectives and Market Reaction
The acquisition has been mostly favored by analysts covering DraftKings, despite the company’s disappointing Q4 results. Analysts have highlighted the potential for the deal to lower DraftKings’ customer acquisition costs (CAC) and add a unique, wide-reach, low-CAC user acquisition channel. This strategic move is seen as a positive step towards diversification and strengthening DraftKings’ position in the competitive online gaming market.
In conclusion, the acquisition of Jackpocket by DraftKings for $750 million is a game-changer for the online lottery and gaming industry. It not only signifies DraftKings’ ambitious expansion into the lottery market but also highlights the growing trend of digitalization in gaming. With shared values of responsible play and a strong financial outlook, this partnership is poised to create significant value for both companies and their users. As the deal progresses toward closure, the industry eagerly awaits the innovative offerings and enhanced user experience that this partnership promises to deliver.
