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DraftKings' share price falls following Hindenburg Research's SBTech criticism

Investment research firm Hindenburg Research has published a report claiming DraftKings subsidiary SBTech was involved in illegal operations.

draftkings

And, as a result, the operator's share price dropped from $50.62 to $44.86, although it has risen to $48.51 since. The initial fall still represents an 11% drop.

The report was published on Tuesday, called “DraftKings: A $21 Billion SPAC Betting It Can Hide Its Black-Market Operations;” it accuses DraftKings of exposing its investors to illegal activities.

The report said: “Unbeknownst to investors, DraftKings’ merger with SBTech also brings exposure to extensive dealings in black-market gaming, money laundering and organised crime.

“Based on conversations with multiple former employees, a review of SEC & international filings, and inspection of back-end infrastructure at illicit international gaming websites, we show that SBTech has a long and ongoing record of operating in black markets.”

A DraftKings representative told Yahoo Finance that the report was written by “someone who is short on DraftKings stock with an incentive to drive down the share price.”

The representative said: “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.”

In addition, Senior Analyst at Loop Capital Markets, Daniel Adam, told Yahoo Finance Live that if the allegations of black-market dealings were true, state regulatory commissions would’ve picked this case up and inquired about them.

However, the Hindenburg report insists 50% of SBTech’s revenue comes from markets where gambling is banned.

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