In this series we’ll be examining successful SPAC deals from the past both in the terms and circumstances of their de-SPAC processes and how they have weathered the storms that have followed after their public listings with research from SPACInsider contributors Anthony Sozzi and Sam Beattie.

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There have been reams of analysis written on the why and how the 2020-2021 SPAC boom occurred, and it very clearly had several macro factors propelling it. The pandemic made dealmaking difficult and roadshows nearly impossible, meanwhile a zero-rate environment made SPACs a perfectly fine place to park cash.

Then, when retail investors started taking an interest and SPACs traded consistently above trust through close, new logs were put on the fire. But at the individual transaction level, if there was any SPAC deal that launched a thousand ships, it was DraftKings/SBTech.

In terms of scale, only six SPAC deals had been announced with higher enterprise values in the nine years prior to DraftKings’ $3.6 billion. But, what differentiated DraftKings from even these was its pull among increasingly active retail investors.

The deal also brought a fair amount of confidence along with its SPAC team Diamond Eagle. The Eagle team has been the second most prolific serial SPAC sponsors with seven completed deals. This is behind only the Gores team with nine, and the Eagle team has managed to have the fifth-best average return on share price among SPAC teams as well.

Among sponsors that have five or more deals under their belt, only the Betsy Cohen-led Fintech SPACs have better average returns at the moment.

So, when Diamond Eagle announced its combination with e-gaming ventures DraftKings and SBTech on December 23, 2019, it had some built in institutional confidence. The SPAC was also able to organize a $414 million PIPE and $109.2 million in convertible notes.

Though massive by current market standards, this was actually was only the third-largest SPAC PIPE of the preceding year behind GS Holdings’ $1.2 biliion PIPE for its combination with Vertiv and the $711 million New Frontier raised in its deal with United Family Healthcare.

But, it was after the deal was announced that things really got interesting.

Diamond Eagle’s shares had been trading slightly below trust value throughout the fall following its May 2019 IPO. By the eve of the deal announcement, Diamond Eagle had risen back to $10.17 and it then closed at $10.84 on announcement day.

From there, it would rise steadily, closing on its its redemption deadline at $17.20 before closing at $17.53 on the day of its April 23, 2020 completion vote. Post-completion, it was off to the races. DraftKings stock broke $40 for the first time less than two months later and would then cross into the $50 range about seven months out from close and into the $60s near its one-year anniversary.

And, it is not as if the parties didn’t hit their bumps in the road in the interim. In fact, just before close, SBTech, which was set to be acquired by DraftKings as a part of the deal suffered a major cyberattack. The gaming data provider at the time powered online casino sportsbook operations in multiple US states and all of its services were down for 72-hour period.

This forced a two-week delay of Diamond Eagle’s completion vote and it also amended the deal ensuring SBTech would receive $10 million in cash and $20 million in shares to pay for any potential indemnities from the hack.

Nonetheless, the hot trading meant that both the company and Diamond Eagle’s sponsor were released from their lockups six months later in October 2020 and the deal’s earnouts with price targets ranging from $12.50 to $16 were all swiftly hit. In fact, this was among the first transactions to see more wheeling and dealing around the earnout and sponsor’s promote.

Diamond Eagle subjected 6,000,000 of its 10,000,000 promote shares to earnout conditions, half of which would be distributed to DraftKings and SBTech holders, not the sponsor itself. Despite this added dilution and the lock-ups all expiring in October, there was little perceptible change in DraftKings’ stock price. It had a high open of $51.18 and a low open of $35.40 during this month.

DraftKings even launched two secondary offerings around this time, raising $1.6 billion in June 2020 and $1.9 billion in October 2020, but neither of these moves made a lasting individual dent in the company’s performance. This was aided of course, by the company’s financial performance.

It projected it would generate $540 million in revenue in 2020 in its initial investor presentation linked to its announcement with Diamond Eagle. It beat this by more than 10% with $615 million in revenue realized. The stock hit its all-time high at $74.09 on March 8, 2021. From then on, the bumps would mostly come from outside the building.

A short-seller report in June 2021 alleged that SBTech had major exposure to illegal gambling markets and potentially organized crime, but this registered barely a blip of a response at a time when shorted EV de-SPACs were facing major tumbles as the result of scandals.

DraftKings, meanwhile, stayed active in the SPAC family, joining the PIPE in Horizon’s combination with live event ticket seller Vivid Seats (NASDAQ:SEAT) in October 2021. This head of steam has rolled on and the company not only exceeded its 2021 revenue targets, but nearly doubled them, generating $1.29 billion.

There was a catch with this performance, however. With fervent marketing to maintain a dominant position in the US e-gaming, DraftKings had been burning cash at a prodigious rate this whole time.

Its net losses for 2021 came in at -$1.5 billion – exceeding revenue – following -$1.2 billion in 2020. This was suddenly a mismatch with a market that wanted the opposite of “growth at all costs” with inflation and interest rates rising and a recession looming.

Although it rose again to $64.58 in September 2021 and has had smaller bounces since, DraftKings has been on a dramatic downswing since last quarter of 2021 like most growth stocks. It last closed at $15.67, which is far from its highs, but still a stellar performance compared with the wider de-SPAC field. Only seven companies that completed SPAC deals in the last 10 years are trading higher in this bear market.

And, while these things are difficult to prove as many factors go into how and why teams decide to launch SPACs, it does feel as if Diamond Eagle/DraftKings has a lasting legacy. If it did not quite spur the 2020/2021 SPAC boom, the timing of its deal acted as a starting shot to the race.

In the nearly 10 years leading up to DraftKings’ February 2020 close with Diamond Eagle, 126 SPAC deals had been announced and closed. In the roughly 32 months since then, 324 SPACs have announced and closed deals.

Many of those deals can be considered direct attempts at capturing the DraftKings lightning in a bottle as well. Eight more gambling deals have been announced since DraftKings’ close, but none have quite captured the same magic. One, in fact, has already been acquired by DraftKings in the form of Golden Nugget Online Gaming.

Sellers received DraftKings stock in return, and even with its share value depressed, DraftKings could likely continue the strategy with its fellow gambling de-SPACs trading at a range of $5.42 in the case of Genius Sports Group (NYSE:GENI) and $0.33 with Lottery.com (NASDAQ:LTRY).

But, the company will continue to have to contend with the continued short patience of the market as it works towards profitability. This morning, it announced its third quarter earnings, which included a slight boost to its 2022 revenue and EBITDA guidance, bringing them to $2.18 billion and -$790 million, respectively.

It now expects to reach EBITDA positivity in the fourth quarter of 2023 and generate between $2.8 billion and $3 billion in revenue that year. The market has not taken this as good news, however, on expectations of that monthly unique payers (MUPs) would grow faster on its platform.

DraftKings grew to 1.6 million MUPs as compared to 1.3 million in the same period last year and these are spending more that twice as much on the platform. But, given the massive spending that DraftKings has put into user growth, the Street may have been expecting more.

It is down about -16% in the pre-market to $13.10 in yet another reminder that the easy good times for de-SPACs and growth stocks are a year behind. But, that certainly doesn’t exclude a turnaround. For DraftKings, its struggle will continue to be to spend to maintain a dominant position as new jurisdictions legalize online gambling, while trying to do so more efficiently.