DraftKings Shares Are Down After IRS Says It Has To Pay Taxes On Entry Fees

Plus, It just got even more unlikely Congress will come to agreement on the next coronavirus relief bill before September, Novavax reached a deal with the U.K. for 60 million doses of its coronavirus vaccine, and Simon Property Group is teaming up with Authentic Brands Group to take over Lucky Brand.

Stocks were lower to start Friday with the Dow falling 42 points, or 0.2%. The S&P 500 slid 0.2%, while the Nasdaq sank 0.5%.

Retail sales for July rose 1.2%, lower than economists’ expectations for an increase of 2.3%, according to the Commerce Department. Even as Americans continue o buy despite the coronavirus pandemic, the future of the economy remains in question and Congress still appears sharply divided over what the next rescue package will look like. “Given continued high unemployment, retail sales in August and in the fall will rely to a large degree on the timing and extent of more government assistance,” said Robert Frick, corporate economist at Navy Federal Credit Union. The Senate has officially adjourned through Labor Day despite not coming to an agreement on the next stimulus package, indicating the impasse is likely to drag on into September. “If the lapse [in relief] lasts into September, I would expect to see defaults, business closures and perhaps personal bankruptcies start to pick up,” said Eric Zwick, a professor at The University of Chicago Booth School of Business. Princeton University professor Douglas Massey added, “If the crisis goes on long enough, and the unemployed don’t get relief, the recession will deepen and ultimately turn into a true depression.”

Researchers say the coronavirus is at least as deadly as the 1918 flu pandemic, according to a new study published in the medical journal JAMA Network Open, and could result in an even higher death toll if public health officials fail to adequately contain it. “What we want people to know is that this has 1918 potential,” said lead author of the study, Dr. Jeremy Faust, adding that the outbreak in New York was at least 70% as bad as the one in 1918 when doctors didn’t have ventilators or other advances to help save lives like they do today. “This is not something just shrug off like the flu.”

Novavax shares are up nearly 10% this morning after the company said it has reached a deal with the U.K. to supply 60 million doses of its experimental coronavirus vaccine candidate. While financial terms haven’t been disclosed for the agreement, the U.K. will collaborate with Novavax on its phase three clinical trial which is expected to begin this quarter. As part of the trial, Novavax’s vaccine candidate—dubbed NVX-CoV2373—will be tested on roughly 9,000 adults between the ages of 18 and 85. “We are honored to partner with the UK government to deliver a vaccine that could provide vital protection in the fight against the global health crisis,” Novavax CEO Stanley Erck said in a release Friday. “Our Phase 3 clinical trial in the UK will be a critical component to assess the efficacy of NVX-CoV2373, which in a Phase 1 trial has already demonstrated to be generally well-tolerated and to elicit robust antibody responses.”

DraftKings shares are down 5% today after the gambling company said its loss for the second quarter widened despite strong revenues and a turnaround in user engagement. DraftKings posted a second quarter loss of $161.4 million, or $0.55 per share, while analysts expected a loss of $0.20 per share. Also weighing on the stock is a new decision by the IRS that will require DraftKings and rival FanDuel to pay federal excise taxes on their entry fees. “This is one of the most significant events in the evolution of sports betting in the United States that has happened in a long time,” said Kate C. Lowenhar-Fisher, a gaming attorney at Dickinson Wright PLLC. The IRS decision could mean fantasy sports companies would face millions of dollars in taxes if they haven’t been paying and are challenged by the agency. The taxes due could be “potentially business-destroying” in some jurisdictions, Lowenhar-Fisher added.

And in Retail news, clothing rental startup Rend the Runway announced today that it is closing all of its stores permanently in an effort to focus its investments on digital and adding more drop boxes for customers. “This has been an evolution over the past two to three years,” said Anushka Salinas, Rent the Runway president and chief operating officer, in an interview. “We always knew we wanted and will continue to have a physical presence strategy. What we know now is the physical presence strategy is about drop boxes.” And mall owner Simon Property Group and apparel licensing firm Authentic Brands Group has been tapped by a bankruptcy court as the winning bidder to acquire denim maker Lucky Brand for $140.1 million. The joint venture—known as Sparc—will assume the role of core licensee and operating partner for Lucky, overseeing all sourcing, product design and development, running all of the retailer’s stores in North America, and its e-commerce business. “This acquisition will boost the value of our portfolio to more than $13 billion in global retail sales annually,” ABG founder and Chief Executive Jamie Salter said in a statement. “Lucky Brand’s DNA resonates strongly with today’s youth and we see tremendous opportunity to unlock its value in key territories around the world.”

Stocks We’re Watching

Aspen Technology (NASDAQ: AZPN): Aspen Technology shares gained as much as 38% yesterday after the asset optimization software company reported fiscal fourth quarter results. “AspenTech delivered solid fourth quarter results that exceeded expectations in the midst of unprecedented economic conditions,” said Antonio Pietri, President and Chief Executive Officer of Aspen Technology. “Customers in our core markets continued to make significant investments in AspenTech products despite the challenges facing their own businesses. Companies in the process and other capital intensive industries increasingly recognize that investing in digitalization initiatives is essential to long-term financial and operational success and we believe we are well-positioned to benefit from this trend.”


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