Draftkings Inc (NASDAQ:DKNG) stock plunged in Tuesday’s afterhours trading as investors took kneejerk reaction to Disney's (NYSE:DIS) move into online sports betting.
Disney’s ESPN is teaming up with Penn Entertainment (NASDAQ:PENN) in a new venture, meanwhile, the Barstool Sports digital media brand is being sold back to its founder Dave Portnoy.
ESPN partners with Penn to create the new ESPN Bet brand, via an exclusive ten-year licensing deal, to run a sportsbook for audiences in the United States.
It immediately will give the Disney-backed business a presence in 16 states as a licensed sports betting operator via a mobile app, website, and retail locations.
Penn pays some US$1.5 billion to ESPN over the anticipated life of the partnership.
The surprise news saw Penn stock soar as much as 25% in afterhours trading, with the stock changing hands as high as US$31.76 immediately afterwards.
Draftkings stock, meanwhile, fell close to 9% trading beneath US$29.00 as traders quickly took seriously the challenge from the new Disney-backed competitor.
Last week, Draftkings was the darling of Wall Street as expectation-beating quarterly results impressed and confirmed the online sports betting company as a leader in the sector alongside Flutter Entertainment PLC (LSE:FLTR) owned FanDuel.
It is very early days but evidently, the kneejerk in the market is not to bet against the mouse.
ESPN Bet will be ESPN’s first sports gambling operation, although gambling content has become an increasing focus on its various platforms in recent years via content sponsorship and competitive ad spending by brands like Draftkings and Fanduel.