DraftKings (NASDAQ:DKNG) stock is falling on Wednesday as investors in the sports gambling company react to a major deal for rival Penn Entertainment (NASDAQ:PENN).
The big news hitting DKNG stock today is Penn Entertainment signing a 10-year licensing agreement with Disney’s (NYSE:DIS) ESPN. That grants it exclusive access to the ESPN Bet trademark in the United States. The two parties can also extend the deal for another 10 years if they choose to do so.
With this deal, Penn Entertainment will switch its Barstool Sportsbook service over to the ESPN Bet brand. It will also pay $1.5 billion to ESPN over the first 10 years of the deal. In addition to that, it will grant EPSN $500 million in warrants for 31.8 million shares of PENN stock.
What This Means for DKNG Stock
Penn Entertainment obtaining the EPSN Bet brand isn’t good news for DNKG shares. It gives the rival company a major foothold in the online sports betting market that will be hard to compete with. It makes sense that investors in DKNG stock would be feeling the heat following such a move.
That has spurred a selloff in DNKG stock today as investors are spooked by the Penn Entertainment and EPSN deal. This has some 5.1 million shares of DKNG changing hands as of this writing. For comparison, the daily average trading volume for DKNG is 11.5 million shares.
DKNG stock is down 7.5% as of Wednesday morning but still up 165% since the start of the year. PENN stock is up 12.1% as of this writing.
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On the date of publication, William White did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
