個案資料

ARK Investment Management LLC (ARK)’s Next Generation Internet ETF (exchange traded fund) accumulated over 5 per cent of the outstanding shares of DraftKings Inc. (DraftKings), which held 24 per cent of the emerging US online sports betting market. Following the legalization of sports betting in May 2018, DraftKings faced escalating competition as competitors spent heavily on advertising and promotions to attract customers. This spending led to increasing quarterly operating losses, and DraftKings’ stock fell about 75 per cent below its fifty-two-week high. ARK needed to re-evaluate its investment to understand whether the stock market’s recent revaluation was a warning sign regarding DraftKings’ ability to weather the competition or just a new opportunity to buy more of an undervalued stock.

This case is suitable for both undergraduate- and graduate-level courses on core corporate finance, valuation, portfolio management, advanced corporate finance, and financial modelling to illustrate a methodology for developing a discounted cash flow valuation model for a fast-growing, unprofitable firm. The case applies the following core concepts: market analysis, forecasting market size based on the total available market, performing a discounted cash flow valuation, and conducting a scenario analysis. It can provide material for a discussion of the emerging US online sports betting market and DraftKings’ business model and operating performance, and it can allow students to develop a valuation analysis and reach conclusions regarding the value of the stock in different scenarios. After working through the case and assignment questions, students will be able to<ul><li>explain the competitive pressures faced by firms in the emerging online sports betting market;</li><li>create a discounted cash flow valuation model for an unprofitable firm facing competitive pressure to forsake profitability in order to obtain scale and market share;</li><li>develop a methodology for forecasting revenue for high-growth firms based on the total available market, serviceable available market, and serviceable obtainable market; and</li><li>assess the attractiveness of a portfolio firm based on its current valuation from the perspective of a portfolio manager.</li></ul>

• valuation
• discounted cash flow
• DCF
• sports betting
• market analysis
• scenario analysis
• forecasting market size
• ARK investment management
• ETF
• investing
• stock