Shares of sports betting firm DraftKings fell on Tuesday after Hindenburg Research announced that it had taken a short position against stocks.
The stock, which has performed one of the best results on Wall Street since going public through a merger with a special-purpose acquisition vehicle last year, was down more than 7% in early trading.
In the report, Hindenburg compares DraftKings’ valuation to that of rival companies and questions the company’s promotional spending and future potential in the highly competitive sports gambling landscape.
The report also alleges that SBTech, a European technology company that merged with DraftKings as part of the SPAC deal, generates significant revenue from questionable gambling practices in foreign markets, particularly in some Asian markets.
DraftKings did not immediately respond to a request for comment.
Hindenburg is a relatively new short selling company that has made several high-profile calls against SPACs over the past year.
The firm took short positions against clean energy vehicle startups Nikola and Lordstown Motors, which have suffered from executive turnover and falling share prices since the Hindenburg reports.
Hindenburg also published a negative report against Clover Health in February, but took no position. Stocks fell in the months after that move, but rallied in early June amid increased interest from retail traders on Reddit.
DraftKings and Diamond Eagle Acquisition Corp. first announced their merger agreement in December 2019 and completed the combination in April 2020. As of Monday’s close, the shares had risen more than 150% since the agreement was finalized and approximately a 400% since the agreement was finalized. Announced.
Sports betting companies have seen a boom since the Supreme Court paved the way for widespread legalization in 2018. Stocks received an additional boost during the pandemic, as some states appeared to accelerate adoption of sports and gambling. online to help shore up budgets amid the recession caused by the pandemic.
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