A publicly traded Vancouver company is edging closer to a merger with a private California company in hopes of becoming a secondary player in the burgeoning online fantasy sports industry.
Shareholders of DraftTeam Daily Fantasy Sports (TSX-V:DTS) are expected to vote September 17 for the June-announced merger with FantasyAces LLC.
“We wanted to be able to move up in a hurry to be viewed as in the top four or five of the companies, which we think you need to be in to survive and move forward,” said DraftTeam’s CEO, David Antony, who would be a director of the new FantasyAces Daily Fantasy Sports Corp. “We think there’s lots of space in the industry because it’s in its beginnings.”
Fantasy sports leagues are low-stakes sport pools in which participants assemble teams of real athletes for a one-day or one-week contest. Points are accumulated based on the athletes’ performance in real league games.
FantasyAces’ driving forces are CEO Tom Frisina – a former vice-president of Electronic Arts’ EA Partners division who was a professor at Vancouver’s Centre for Digital Media from 2006 to 2011 – and sons Bryan Frisina (operations manager) and Trent Frisina (creative director).
Trent Frisina is a frequent guest on SiriusXM radio’s fantasy sports channel. Tom Frisina would helm the new company. A private placement of up to $5 million is planned, with the first tranche of $2.15 million closing August 31.
“We’ve got a financing that’s closing concurrent with the merger, which will be more than sufficient, we think, to be able to execute on our plans for the rest of the season,” said Calgary-headquartered Antony, who led Sabre Graphite Corp.’s takeover of DraftTeam in March.
In an August 24 news release, DraftTeam announced it had prize payouts of $6.2 million for the year, through July 31, 2015. As of May 31, FantasyAces claimed 24,517 members, of which 9,340 were active, and US$349,154 gross revenue and US$3.4 million in contest payouts.
The merger’s formalization comes just in time for the National Football League and National Collegiate Athletic Association college football seasons and the prime fourth quarter, the busiest time for fantasy sports, Antony said.
DraftTeam launched in September 2013 and derives revenue from entry fees, ranging from US$1 to US$500 per contest, per player, and advertising sales. In May, it reported a $10 million market capitalization and $1.4 million working capital.
The synergy of low-stakes betting and live TV’s most lucrative properties led to Fox Sports’ $150 million purchase of 11% of industry leader DraftKings in late July. DraftKings inked a sponsorship deal with the National Hockey League last November. Its investors include Major League Soccer and Legends Hospitality, the New York Yankees and Dallas Cowboys’ joint venture. Its main competitor, FanDuel, has partnerships with the National Basketball Association and various National Football League teams.
Montreal’s Amaya Inc. (TSX:AYA) acquired Austin, Texas-based Victiv in mid-August and announced it would rebrand it StarsDraft and offer it through its PokerStars websites. Antony insists there is room in the market, because fantasy fans are not loyal to one site.
“Even the big players openly admit this, that most fantasy players play on more than one site, so we don’t have to go out there and try to take members away from FanDuel or DraftKings,” Antony said. “There are enough new ones coming into the space, we can see that. There are enough that will play on more than one site.”
The Fantasy Sports Trade Association estimates that 56.8 million people in the U.S. and Canada play fantasy sports online, compiling teams daily or weekly on free-to-play or bet-for-money websites. •
