Corporate insiders tend to have far more information on their companies than outsiders such as analysts and retail investors do. If these individuals are buying company stock, it’s often worth taking a closer look.
In this report, we are going to highlight a large insider purchase at DraftKings Inc (DKNG:US). DraftKings is an American fantasy sports contest and sports betting operator. The company went public in 2020 through a SPAC deal with Diamond Eagle Acquisition Corp. It is listed on the NASDAQ Global Select Market and currently has a market capitalization of $30.3 billion.
DraftKings Inc: Insider Buying
Our insider transaction data shows that on November 16, DraftKings’ Vice Chairman Harry Sloan bought 50,000 DKNG shares at a price of $39.52 per share. This trade cost the insider just under $2 million and increased his holding to 63,035 shares.
This trade is worth highlighting due to the fact that Mr. Sloan was the founder of Diamond Eagle Acquisition Corp, which merged with DraftKings in 2020. This means that he is likely to know the company very well.
Mr. Sloan is also an experienced business executive and entrepreneur. To date, he has launched eight SPACs. Previously, he served as Chairman and CEO of Metro-Goldwyn-Mayer, Inc. (MGM) and was also the founder, Chairman, and CEO of SBS Broadcasting, Europe’s second-largest broadcaster.
What stands out about this trade is the size of the purchase. The fact that Mr. Sloan has spent nearly $2 million on shares suggests he’s confident the stock is going higher. It’s worth noting that this is the first insider purchase at DraftKings since the company went public last year.
DraftKings’ recent Q3 results showed that the company continues to grow rapidly.
For the three months ended September 30, revenue amounted to $213 million, an increase of 60% year on year, while Monthly Unique Payers (MUPs) increased 31% compared to the third quarter of 2020. On average, 1.3 million monthly unique paying customers engaged with DraftKings during each month of the third quarter. Average Revenue per MUP was $47 in Q3, representing a 38% increase versus the same period in 2020.
“DraftKings had a strong third quarter that highlights our team’s unique ability to drive engagement with our core customers while simultaneously launching new states and verticals and completing the complex migration to our own in-house technology ahead of schedule,” commented Jason Robins, DraftKings’ Co-founder, CEO, and Chairman.
On the back of this strong performance, the company raised the midpoint of its 2021 revenue guidance and introduced 2022 revenue guidance pointing to another year of strong growth. For 2022, it expects revenue of $1.7 billion to $1.9 billion, which would represent growth of 43% based on the mid-point of 2021 revenue guidance.
Since these results, the DKNG share price has pulled back. The large buy from Mr. Sloan indicates that he expects the stock to rebound. We see this insider transaction activity as a bullish indicator.