Shares of DraftKings (DKNG) jumped Wednesday after the sports gambling and entertainment platform announced that basketball legend Michael Jordan has taken an equity stake in the company.
The stock traded at $41.80, up 13.19%. Shares have soared about 145% through Wednesday since going public in April.
The company didn’t specify the size of Jordan’s holding. His equity interest comes in exchange for “providing guidance and strategic advice to the board of directors on key business initiatives,” DraftKings said in a statement. His status as special adviser to DraftKings’ board of directors is effective immediately.
Jordan will specifically “provide strategic and creative input to the board of directors on company strategy, product development, inclusion, equity and belonging, marketing activities and other key initiatives,” the company said.
“Michael Jordan is among the most important figures in sports and culture, who forever redefined the modern athlete and entrepreneur,” said DraftKings CEO Jason Robins. “The strategic counsel and business acumen Michael brings to our board is invaluable.”
Jordan serves as the chairman and majority owner of the NBA’s Charlotte Hornets.
Morgan Stanley analyst Thomas Allen last month downgraded both DraftKings and casino company Penn National Gaming (PENN) – to equal weight from overweight amid valuation concerns.
He sees the two companies as “arguably the purest plays” on the themes of legal U.S. sports betting and online gambling.
But he’s concerned about investor euphoria and warns of six potential risks.
1. A reversal of consumers’ stay-at-home trend;
2. A dampening of consumer gambling demand thanks to a lack of further federal government stimulus;
3. Increased competition in the industry;
4. Disappointment about lack of progress in the legalization of sports gambling;
5. A potential cancellation of the NFL season;
6. Expiration of the lock-up for DraftKings insider shareholders.