Market analyst Hindenburg Research released a report on Tuesday with harsh allegations against Bulgaria-based gaming technology company SBTech — which merged with DraftKings when it went public through a SPAC merger in June 2020.
The research firm estimates that around half of SBTech’s revenue comes from markets where gambling is banned.
DraftKings’ stock dropped more than 11% at market open on Tuesday but partly recovered thereafter.
DraftKings denied Hindenburg’s claims, stating that “SBTech does not operate in any illegal markets” and that DraftKings reviewed SBTech’s business practices and was “comfortable with the findings.”
DraftKings has never turned a profit and is not expected to until 2026. It has a slew of partnerships with the NBA, NFL, UFC, NASCAR, PGA, and media companies.
Hindenburg revealed it is short-selling DraftKings and will profit from drops in its stock. Hindenburg is also facing a lawsuit from investment firms Catalyst Capital and Callidus Capital over allegations of a short-selling conspiracy.
Credit Suisse issued a buy rating for DraftKings, saying the dip in price represented a good opportunity. The stock quickly generated buzz on the Reddit forum wallstreetbets, which became famous for pumping GameStop.
The sports betting operator brought in $312 million in Q1 earnings, up 253% year-over-year from $89 million.
Editor’s note: Front Office Sports is a media partner with DraftKings.