The Israeli who helped trigger the SPAC wave runs into trouble

• Date: 18 July 2021
• Published date: 18 July 2021

MecKenzie leapt to the ranks of Israel's wealthiest after the company he founded, SBTech, a provider of technological solutions for online sports betting and gaming, was merged in late 2019 with US sports betting company DraftKings. In a three-way deal, the merged company became listed on Nasdaq though a merger with a SPAC, Diamond Eagle, at a valuation of $3.3 billion. In the merger deal, McKenzie became the largest private shareholder in DraftKings (Nasdaq: DKNG), with an 11.3% stake in the merged company.

Last month, however, MecKenzie's SBtech was the focus of a negative report by investment house Hindenburg, which specializes in taking short positions. The report has shaken DraftKing's share price since it was released.

The merger and the success

DraftKings was founded in 2012, and started out managing daily fantasy sports games in which surfers could bet on the performances of baseball players, and later on players in other sports. The company exploited a loophole in the law which did not define fantasy sports as gambling. The company's activity expanded following a decision by the US Supreme Court in 2018 that enabled other states, besides Nevada, to permit betting on sports results, which more than half the states in the US have now done.

DraftKings wanted to buy SBTech and form a merger that would give it control over the technology that operates Internet betting systems. After it was proposed a merger with SPAC Diamond Eagle, the idea of a three-way merger began to take shape, including a meeting in Tel Aviv between MecKenzie and Harry Sloan, the SPAC's sponsor, in June 2019.

The merger, which as mentioned took place in April last year, was received with enthusiasm, and DraftKings' share price shot up from a starting price of $10 to a peak of $72 in March this year. The addition of super-celebrity Michael Jordan and model Gisele Bündchen as investors and special advisers to the company contributed to the rise in the share price. In fact, the success of the DraftKings merger is pointed to as one of the causes of the flood of SPAC mergers on Wall Street in the past year.

MecKenzie founded SBTech in 2007. The company was registered in Gibraltar, and later operated as a company in the Isle of Man. SBtech's development activity is in Bulgaria and Ukraine, with administration in Israel and commercial support in London. At the time of the merger with DraftKings, SBtech employed about 1,200 people around the world. In 2018, it posted revenue of €94...