DraftKings sinks 12% after short-seller report claims online sports betting company is hiding illegal activity

The fantasy sports website DraftKings is shown on October 16, 2015 in Chicago, Illinois.
The fantasy sports website DraftKings is shown on October 16, 2015 in Chicago, Illinois.

  • DraftKings plunged as much as 12% before retracing some losses on Tuesday.
  • An report from Hindenburg Research claimed the online sports betting company had “systematically skirted the law.”
  • The short seller is a frequent critic of popular startups, having previously targeted Nikola, Lordstown Motors, and Clover Health.
  • See more stories on Insider’s business page.

DraftKings plunged as much as 12% Tuesday on allegations by a short seller of illegal activity.

A report from Hindenburg Research published Tuesday morning, which unveiled the firm’s short position in the online sports betting company, claimed DraftKings had “systematically skirted the law” via two Bulgarian subsidiaries. Meanwhile, insiders made use of market froth to sell more than $1.4 billion in DraftKings shares, Hindenburg alleged.

In a statement, DraftKings downplayed the findings.

“This report is written by someone who is short on DraftKings stock with an incentive to drive down the share price,” the company told Yahoo Finance. “We conducted a thorough review of [one of the Bulgarian subsidiary’s] business practices and we were comfortable with the findings.”

Released ahead of market open, the report sent DraftKings shares sliding, bottoming out at $44.65 a share versus a previous close of $50.62. But by 11 a.m. New York time, the stock had recovered around two-thirds of the initial drop, and had remained stable as of this writing.

Since the Supreme Court legalized sports betting nationwide in 2018, DraftKings has leaned on partnerships with high-profile brands, like the NFL and NBA, to stand out in a crowded, sometimes opaque market.

The firm went public through a SPAC in 2020, combining with one of the Bulgarian subsidiaries, called SBTech, that Hindenburg accuses of criminal conduct.

The DraftKings drop continues a rough stretch for the stock, which has fallen 28% since mid-March.

Shares of the company were trading 4.65% lower at $48.26 as of 3:29 p.m. ET on Tuesday.

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Ask an analyst – our columnist answers your questions about how novice traders can thrive in financial markets

Stock Market Bubble
A trader blows bubble gum during the opening bell at the New York Stock Exchange (NYSE) on August 1, 2019, in New York City.

  • Insider’s new “Ask An Analyst” column offers novice investors advice on how to succeed with stocks.
  • Ryan Paisey is a veteran with nearly 20 years’ experience on the markets.
  • Find out below how you can submit him questions.
  • See more stories on Insider’s business page.

Retail investors – everyday people who buy stocks – are more important than ever in trading.

In January, Redditors saved bricks-and-mortar video game chain GameStop from being shorted, tanking Wall Street veterans in the process.

They have since also piled into cryptocurrencies, driving “meme token” Dogecoin to record highs and pumping up the value of anything from silver to lumber.

Hedge funds can no longer look down on them as people who follow the leader.

But lowering the entry barrier to the stock market has meant a lot of novices are trading money they cannot afford to lose.

Insider is launching Ask An Analyst – an advice column that aims to make you a better trader with straight forward responses to basic questions.

Read the column: How to find stocks with the most growth potential

This isn’t about listing stock picks. If you’ve wondered “how much research should I be doing on a stock? What am I doing right? What am I doing wrong?” this is the column for you.

Our columnist is Ryan Paisey, a veteran trader who has been in markets for nearly 20 years, and runs trader news service PriapusIQ.

“For too many players, the basic knowledge of the games we play are lacking, they are more concerned with guessing ‘up or down’ than understanding the basics which can immeasurably help improve their decision making process,” he says.

“I’m not here to tell you how to trade. I am here to share my 20 years of experience with those that have questions which only experience can answer.”

To submit your question, email jsommers@insider.com with “Ask An Analyst” in the subject line.

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Robinhood is adding more customer service representatives after Congress grilled its CEO about a lack of support lines

robinhood vlad tenev
Co-founder and co-CEO of Robinhood Vladimir Tenev in 2016.

  • Trading app Robinhood is expanding its live customer support following a heated Congressional hearing this month. 
  • The company said it will double the number of full-time representatives this year and expand to new areas.
  • Representatives grilled Robinhood CEO Vladimir Tenev last week after a GameStop stock trading frenzy in January.
  • Visit the Business section of Insider for more stories.

Stock-trading app Robinhood is expanding its live phone support and doubling the number of representatives after the company’s lack of customer assistance came under fire at a Congressional hearing last week.

In a blog post Monday, Robinhood said users will have access to “a registered financial representative” by phone to help with a broader range of issues, including account security and open or recently expired options positions. It plans to expand to more situations as well, such as trading and transfer issues. 

In doubling the number of full-time registered representatives this year, the company said it will expand to new regions to support the goal. 

“We want to make sure we’re there for customers,” the company said, “especially in time-sensitive situations.”

During a Congressional hearing on February 18, Rep. Sean Casten called the Robinhood helpline and played the company’s 12-second message that ends in a hang-up to give people a sense of the support Robinhood users receive from the company. Casten also referenced a 20-year-old trader who died by suicide after the app mistakenly showed a negative balance of $730,000. He didn’t receive an answer from the company about the canceled options on the phone or via email and died by the time the company responded, his family said. 

Representatives questioned Robinhood and CEO Vladimir Tenev for five hours regarding the company’s role in a trading frenzy focused on GameStop and other “meme stocks” in January. Tenev apologized to the Kearns family during the hearing. The company, based in Menlo Park, California, was founded to make the stock market more accessible to retail investors, but Casten claimed it takes advantage of inexperienced traders.

A company spokesperson declined to comment on the reasoning behind the expansion. 

“Millions of people are making their voices heard through the markets,” Robinhood said in its blog post. “We’re investing heavily in customer support and remain committed to improving to serve you.”

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Rep. Ayanna Pressley dubs Georgia GOP Sens. Loeffler and Perdue ‘the Bonnie and Clyde of corruption’

ayanna pressley
Rep. Ayanna Pressley speaks at a program voicing support for those protesting against police brutality against Black Americans in Boston on June 2, 2020.

  • Rep. Ayanna Pressley on Friday called Georgia Sens. Kelly Loeffler and David Perdue “the Bonnie and Clyde of corruption.”
  • The Massachusetts Democrat made the comments during an interview with MSNBC’s Joy Reid about turning out voters for the January 2021 runoff elections in the Peach State.
  • “Georgia, do your thing,” she said. “I know we’re asking a lot of Georgia … Do what you do. All eyes are on Georgia.”
  • Visit Business Insider’s homepage for more stories.

Rep. Ayanna Pressley on Friday slammed Georgia Sens. Kelly Loeffler and David Perdue, calling them “the Bonnie and Clyde of corruption.”

During an appearance on MSNBC’s “The ReidOut” with host Joy Reid, the Massachusetts Democrat spoke about turning out voters for the January 2021 runoff elections in the state, which will determine control of the US Senate.

“Georgia, do your thing,” she said. “I know we’re asking a lot of Georgia. But do your thing, Georgia. Do what you do. All eyes are on Georgia. [Senate Majority Leader] Mitch McConnell [of Kentucky]…Loeffler, Perdue – they are the Bonnie and Clyde of corruption.”

She added: “They are all the same. We need to regain control of the Senate. Georgia, do what you do.”

An analysis by The New York Times showed that Perdue sometimes made more than 20 stock transactions in one day, and he made nearly 2,600 trades during his first term in office. His financial transactions came under scrutiny this past year, with the Times reporting that “the Justice Department had investigated the senator for possible insider trading in his sale of more than $1 million worth of stock in a financial-analysis firm, Cardlytics.”

Though prosecutors ultimately did not file charges, questions lingered about stock trading among all senators and potential conflicts of interest.

Earlier this year, the Justice Department began an investigation into Loeffler after she sold millions of dollars’ worth of stock in January after a briefing about the coronavirus. No charges were filed in her case, and she has denied any wrongdoing, calling attacks against her “a political witch hunt by the fake news media.”

On December 15, President-elect Joe Biden visited Georgia to stump for the challengers to Loeffler and Perdue, Democrats Raphael Warnock and Jon Ossoff, respectively.

Loeffler, who is running in a special election to fill the remaining term of GOP Sen. Johnny Isakson, and Perdue, who is running for reelection to a second term, both fell below the 50% threshold to win their races outright, which necessitated runoff elections.

The 2020 elections produced a 50-48 advantage for the Republicans, with the outstanding Georgia Senate races making the difference in McConnell keeping control of the chamber or Senate Minority Leader Chuck Schumer of New York becoming the new majority leader. If Democrats can win both seats, Vice President-elect Kamala Harris would be able to break tie votes, giving the party control of the Senate for the first time since 2015.

As of Friday morning, over 1.1 million voters had already cast ballots for the runoff elections, according to Reuters.

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