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DraftKings and Holders to Offer 32 Million Shares; Stock Lower

Sports-gambling company DraftKings and holders are selling 32 million shares. The company intends to use its proceeds for general purposes.

Shares of DraftKings are lower on Monday after the sports-gambling company said it and holders would sell a total of 32 million shares.

The company will offer 16 million shares and certain holders will offer another 16 million.

DraftKings, Boston, said it intended to use the proceeds of its sale for general purposes.

At last check the shares were down 4.8% to $60.67.

DraftKings and the holders will give the underwriters a 30-day option to purchase up to an additional 4.8 million shares.

Credit Suisse Securities (USA) and Goldman Sachs are joint book-running managers and representatives of the underwriters for the offering.

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Last week, Needham analyst Brad Erickson initiated coverage of DraftKings with a buy rating and Wall-Street-high price target of $70 a share. 

Erickson said DraftKings was "one of the leading beneficiaries as online sports betting and gambling take off in the U.S. -- an opportunity we size between $42 [billion] and $58 billion annually longer term."

Online sports betting has taken off in the U.S. after the Supreme Court struck down a 1992 federal law banning sports betting at the federal level. A number of states have enacted sports-betting legislation.

"We expect the regulatory tailwind to persist and believe online providers' access to data creates a structurally better user experience vs. brick and mortar," Erickson said.

For DraftKings specifically, Needham's analyst sees its "datacentric approach to customer acquisition" as a catalyst that will help the company "regularly exceed top-line forecasts."

Last month, the company signed a content and marketing agreement with Walt Disney  (DIS) - Get Walt Disney Company Report sports network ESPN.

DraftKings said the deal allowed it to integrate its products across ESPN's digital platforms, while also giving it the chance to provide content to the network's studio-produced sports programs.