DraftDay Fantasy Sports Inc (NASDAQ:DDAY) Explodes Up The Charts

Source: fantasyfootballers.org and NFL.com

DraftDay Fantasy Sports Inc (NASDAQ:DDAY) is exploding up the charts as investors get excited about the upcoming NFL season. The NFL combine started this week and fantasy sports players are already thinking about the upcoming draft and which players will play for them. This has investors excited because DraftDay Fantasy Sports is the third-largest operator in the daily fantasy sports industry and the only publicly traded name in this fast-growing space.

DraftDay Fantasy Sports Inc is the largest shareholder of DraftDay Gaming Group, with a 44% stake. Sportech owns 35%. The company hopes that by combining and capitalizing on the well-established operational business assets of DraftDay and Sportech, the new DraftDay is well-positioned to become a significant player in the explosive fantasy sports market. DraftDay has paid out over $30 million in prizes with increased player retention and brand loyalty. DraftDay Fantasy Sports also operates MyGuy and Viggle Football both of which offer real-time interactive participation with professional and college football games; Wetpaint, which offers entertainment and celebrity news; and Choose Digital, a digital marketplace platform that allows companies to incorporate digital content into existing rewards and loyalty programs in support of marketing and sales initiatives.

IBISWorld estimates that revenue for the fantasy sports market has grown at an annual rate of 10.8 percent to $2.0 billion from 2010 to 2015. DraftDay will have a differentiated platform in the industry. The company plans to focus on B2B partnerships, including new ventures with companies.

The company just closed the sale of a number of assets, including the Viggle applications and rewards program, for stock in Perk.com, a leading cloud-based mobile rewards platform provider based in Austin, Texas. Perk.com trades on the Toronto exchange under the symbol PER.TO. Perk is a mobile-centric rewards platform targeting the “New Consumer” and rewarding people for their everyday mobile and internet activities.

Perk.com is paying in $4.7 million worth in shares along with a $1 million advance, subject to some performance conditions; DraftDay will get two warrants to purchase a total 2 million Perk.com shares. DraftDay CEO Robert Sillerman says if earnouts are achieved and warrants become exercisable, DraftDay will have received about $75 million in consideration.

At the present time, Wetpaint.com, its play-along app MyGuy, and its B2B provider of digital rewards in loyalty programs Choose Digital, will be retained and managed by Viggle as it explores strategic alternatives for these non-DraftDay assets. Due to the deal structure, DraftDay anticipates that it will participate in the upside of the Viggle assets through the shares that it receives in Perk.com, both at the closing of the transaction and upon earn-out, depending on the business meeting certain performance metrics and PER.TO shares reaching certain targeted levels. CEO Robert F.X. Sillerman said:

“Having launched the Viggle app just a few short years ago, we have accomplished a lot. Perk.com is now a natural fit for further monetizing these assets, as it is the leading mobile rewards program. We believe this transaction will be a win-win for all participants to the transaction, including our shareholders, as we expect to benefit from two fast growing digital spaces with DraftDay Gaming Group and our stake in Perk.com. The transaction will allow us to achieve continuing upside of a significant ownership position in this exciting combination of businesses.”

The most controversial aspect to DDAY is Chairman and CEO Robert F.X. Sillerman. He was once on the Forbes 400 after selling SFX Entertainment to Clear Channel in 2000 for $4.4 billion. He refounded SFX Entertainment in 2012 as a promoter of electronic dance music festivals only to see SFX Entertainment fall into bankruptcy earlier this month. Shareholders are very upset with Mr. Sillerman and many blame him for the company's failure.

Right now it appears he is banking on DraftDay and looking to make his comeback with this vehicle. We trust that he's learned from past mistakes and sees DDAY as an opportunity to vindicate himself with investors. The good news is that DDAY is currently trading at just a $23 million valuation. Due to the excitement surrounding fantasy sports, we can easily see DDAY continuing on its momentum run higher. We will be updating Insider Financial as soon as we know more. For continuing coverage on DDAY and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

Disclosure: We have no position in DDAY and have not been compensated for this article.