- 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.