DraftKings Shares Plunge as Short-Seller Alleges Organized Crime Link
Shares in fantasy sports pioneer DraftKings plunged more than 11% in early trading Tuesday as short-seller Hindenburg Research issued a report stating the company has “exposure to extensive dealings in black-market gaming, money laundering and organized crime.”
Hindenburg Research, a small New York group led by forensic accountant Nathan Anderson, stated that the links originate with SBTech, the Bulgaria-based betting technology business DraftKings merged with as part of its 2020 going-public merger with Diamond Eagle Acquisition Corp., a SPAC led by Hollywood executive Jeff Sagansky. SBTech founder Shalom Meckenzie is a DraftKings board member.
DraftKings shares opened 11.2% lower at $44.95 on high volume on the news and recovered slightly in the first half-hour of trading.
Hindenburg claims that about half of SBTech’s revenue comes from markets where gambling is unregulated or banned, including China and Vietnam. Hindenburg says many of the troublesome links it believes it sees come from an entity named BTI, which was spun off from SBTech. The report cites anonymous sources behind the claims and includes past webpages and screen grabs to seemingly connect present and former SBTech employees to BTI. The researchers conclude by saying the appearances of crime links means DraftKings should submit to an independent audit of its revenue streams.
A request for comment from DraftKings wasn’t immediately returned.
The report was posted online prior to trading Tuesday. Hindenburg said it has taken a short position in DraftKings, meaning it aims to profit from shares falling in price. The group’s reports are contested by their target companies and—regardless of accuracy—typically have a lasting effect on share prices. Hindenburg previously has shorted Nikola, a next-gen fuel truck maker that went public by SPAC last year. Shares of that company are down $20 from Hindenburg’s report, to around $17.
DraftKings is one of the most successful companies to come public by SPAC. Its shares are up more than four-fold since announcing in December 2019 its intention to go public.
More from Sportico.com
