Focus On Apes: Will the Reddit Crowd Come To the Rescue of DraftKings (DKNG) Investors as Hindenburg Research Is Out With Another Bruising Salvo Today?

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DraftKings (NASDAQ:DKNG), the Boston-based sports betting firm, has become the latest target of the prolific short-seller Hindenburg Research.

As per a well-detailed report published by Hindenburg Research today, DraftKings is purportedly involved in black-market gaming, money laundering, and organized crime. These are, of course, shocking allegations. Bear in mind that DraftKings went public recently via a 3-way merger that involved a SPAC as well as the Bulgaria-based gaming tech firm, SBTech. Hindenburg alleges that SBTech is involved in quite a lot of shady dealings, with as much as 50 percent of its revenue coming from questionable sources. Readers should note that SBTech did try to isolate itself from these questionable revenue streams by channeling its illicit relationships toward a new distributor, BTi/CoreTech. However, Hindenburg alleges that the new distributor was merely a front as it employed over 50 SBTech employees. Moreover, the short-seller alleges that SBTech also maintains operations in Iran, a heavily sanctioned country. Finally, DraftKings insiders have dumped over $1.4 billion in shares since the company went public last year. While this is usually part of the routine, any involvement in illicit activities adds a whole new context to these liquidations.

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This brings us to the crux of the matter. Hindenburg Research is, of course, a prolific short-seller, having successfully targeted the likes of Nikola Corporation (NASDAQ:NKLA), Clover Health (NASDAQ:CLOV), and Lordstown Motors (NASDAQ:RIDE) recently. Nonetheless, the current retail sentiment is heavily skewed against short-sellers, and today’s attack on DraftKings is no exception to this emerging paradigm. The betting firm has cropped up on WallStreetBets radar, with a number of posts seemingly in favor of a massive pump. However, it is too soon to judge whether DraftKings will become a subject of interest for the Reddit crowd, especially as its short interest stood at a paltry 10.9 percent as of the 28th of May. Additionally, the company’s potentially criminal conduct here adds another layer of uncertainty. Nonetheless, today’s development does merit continued vigilance. After all, in a world in which AMC (NYSE:AMC), GameStop (NYSE:GME), and other meme stocks may become a member of the Russell 1000 index, DraftKings can certainly defy rational expectations. Stay tuned!

Update: DraftKings has Issued an Official Statement

“This report is written by someone who is short on DraftKings stock with an incentive to drive down the share price. Our business combination with SBTech was completed in 2020. We conducted a thorough review of their business practices and we were comfortable with the findings.  We do not comment on speculation or allegations made by former SBTech employees.”

The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.
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