Will the DraftKings IPO Date Be Impacted by Insider Trading Scandal?

Daily fantasy sports company DraftKings Inc. has exploded in popularity since 2011, and investors are now waiting for the DraftKings IPO date.

While no official DraftKings IPO date has been set, a 2016 IPO is a possibility now that the company has been valued over $1.2 billion.

Draftking footballBut the DraftKings headlines this week have focused on the daily fantasy sports scandal, not the IPO. The scandal erupted this week when a midlevel DraftKings employee with "insider information" won $350,000 on rival site FanDuel.

Now, DraftKings CEO Jason Robins and FanDuel officials have called on all industry members to quickly address the matter. New York Attorney General Eric Schneiderman has also launched an investigation into both DraftKings and FanDuel.

DraftKings and FanDuel have been vying for the top spot in the popular daily fantasy sports industry. According to Eilers Research, the industry is expected to top $2 billion in revenue by 2020.

"Those two companies have raised more money in the past year than in the history of the fantasy sports industry combined," Paul Charchian, president of the Fantasy Sports Trade Association, said in late 2014.

DraftKings has only been around since 2011, but it was already included in this year's CNBC Disruptor list. When asked about taking the company public, Robins said on the network's "Mad Money" segment that an IPO was not on the radar.

Still, going public looks like the next logical step for DraftKings even amid the scandal. The company has already raised $426 million with a valuation north of $1.2 billion.

And even if the DraftKings IPO date is delayed into late 2016, it's likely to be one of the biggest initial public offerings of the year. Here's what you need to know...

As DraftKings IPO Date Approaches, Here's What to Watch

DraftKings has already raised millions from some high-profile investors.

Backers include Fox Sports, Madison Square Garden Co. (NYSE: MSG), Major League Baseball, the National Hockey League, and Major League Soccer. In July, DraftKings inked a $250 million three-year advertising deal with Walt Disney Co.'s (NYSE: DIS) ESPN.

A number of venture capital firms are also early investors. In August 2014, DraftKings announced it closed a $41 million Series C round of funding led by The Raine Group. Other investors include New England Patriots owner Robert Kraft and an ownership group that works with the Dallas Cowboys and New York Yankees.

Thanks to its vast brand-awareness and popularity, it's quite possible DraftKings stock will climb higher following the DraftKings IPO date.

But at Money Morning, we recommend waiting several quarters after an initial public offering before investing in a newly issued stock.

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Typically, IPOs only benefit institutional investors like hedge fund managers and investment banks that are willing to buy large quantities of a stock before its debut. These Wall Street "VIPs" buy in at a very low price, much lower than you or I.

Retail investors can only buy in once the stock begins trading. If there is high demand when the stock begins trading, we end up paying an immediate premium. When the new stock cools off, which it almost always does, retail investors are looking at a significant loss.

If you wait two or three quarters, you'll not only sidestep much of DraftKings stock's early volatility, but you'll also have a better grasp of the company's financial growth.

According to Money Morning Chief Investment Strategist Keith Fitz-Gerald, there are still a few ways to collect the best IPO profits - that don't involve buying DraftKings stock.

Here are the three best ways to play the exciting IPO market...

The Bottom Line: The DraftKings IPO date hasn't been announced, and the latest scandal could mean we have to wait even longer for the deal. But the way the industry and company are growing ensures that the DraftKings IPO will be one the year's biggest financial stories when it comes to market. While the DraftKings IPO will probably draw in a huge number of investors, we recommend waiting for several quarters before investing.

Follow us on Twitter @moneymorning.

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