DraftKings (NASDAQ: DKNG) stockpile slumped 13.9% on Monday, performing significantly worse than other gaming names, including sportsbook operators, amid rising concerns that Proposition 27 is header for Election Clarence Shepard Day Jr. defeat inwards California.

In a annotation to clients today, Robert Oppenheimer analyst Jed Grace Patricia Kelly says parting of the reason out for the Monday playground slide past DraftKings inventory was a Wall Street Journal article. The bit pointed come out that operators supporting Prop 27 are slashing television system publicizing outlay amid slackness polling data. However, that’s been known for several weeks, prompting Weary Willie to say he was somewhat surprised by DraftKings’ lantern slide yesterday.

Prop 27 is supported past Bally Bet, Barstool Sportsbook, BetMGM, DraftKings, Fanatics, FanDuel, and WynnBET — companies that have presumption $169.2 million to a campaign designed to garner reenforcement among Californians frustrated with the state’s stateless problem. The competing Proposition 26 is backed past tribal casino groups.

Recent polling data suggest both measures are head for licking — an outlook with which Oppenheimer’s Eugene Curran Kelly concurs.

DraftKings Could Turn Golden State Lemons Into Lemonade

Kelly notes that licking of Prop 27 removes a substantial bearish beetle on DraftKings stock. That’s because it eliminates the demand for the keep company to potentially rise working capital to backing disbursal inward the largest state.

That’s vital on multiple levels, non the to the lowest degree of which is that this is an inopportune clip for DraftKings to pat uppercase markets. The company’s choices for nurture hard cash potential furuncle pull down to selling corporate debt or issuing more shares, neither of which is appealing.

Investors are hoping Grace Patricia Kelly is right inwards assuming the gaming manipulator won’t imminently conjure up cash. That’s because a bring together government issue would almost certainly live rated junk, so carrying a mellow interestingness rate. Likewise, investors’ tolerance for dilutive equity sales is wearing thin.

Additionally, it’s possible that if Prop 27 were to pass, not only if would tribes defend inward court, but DraftKings and peers would engage in  a New York-style promotional battle. They would live expected to  coughing up big amounts of cash to win customers. That’s at a clip when Wall Street is demanding restrained spending and to a greater extent profile on profitability.

Kelly’s California Call

Oppenheimer’s Weary Willie offers upwardly a pragmatical solvent for what will follow of regulated sports wagering in Golden State if both Prop 26 and Prop 27 miscarry on Election Day.

The analyst sees sports betting inwards the commonwealth existence pushed out another 2 or deuce-ace years, and that the pose to live adoptive will live similar to states such as Connecticut River and Michigan. Those states make profound tribal cassino footprints, but permit mobile sports wagering via tribal partnerships with operators such as DraftKings.

Kelly adds that two or triad years out, DraftKings will follow inwards a break financial spatial relation to get into California. That’s as the companionship turns profitable and generates more revenue in the states in which it currently operates.