Short Seller That Took On Nikola, Lordstown Makes Explosive Claims On New Target

DraftKings (DKNG) subsidiary has ties to organized crime, alleged Hindenburg Research, the brief vendor that took on EV startups Nikola (NKLA) and Lordstown (RIDE). DKNG inventory gapped down.


The on-line playing firm has but to answer a request for remark.

Meanwhile, DKNG inventory mentions on retail buying and selling Reddit discussion board Wallstreetbets took off, after the Hindenburg report.

The social media platform has launched a number of meme shares within the final a number of months, pumping shares which can be shorted, together with GameStop (GME) and AMC Entertainment (AMC).

DKNG inventory went public on April 23, 2020 in a three-way merger with Diamond Eagle Acquisitions and Bulgaria-based gaming know-how firm SBTech. The inventory has risen practically 300% from its IPO value of 19 to an all-time excessive of virtually 75 on March 22.

Hindenburg Research states in a June 15 report that SBTech accounted for about 25% of complete income initially. It “was the only positive contributor to operating income, providing both financial stability and technology to the deal,” the analysis agency added.

However, the agency additionally stated that “brings exposure to extensive dealings in black-market gaming, money laundering and organized crime” that traders will not be conscious of.

Hindenburg says it is basing the declare on conversations with a number of former workers, a assessment of SEC and worldwide filings. Also on inspection of back-end infrastructure at illicit worldwide gaming web sites.

“We show that SBTech has a long and ongoing record of operating in black markets,” the report stated.

In a press release supplied to Yahoo Finance, DraftKings stated: “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.”

Meanwhile, Seeking Alpha reported that Credit Suisse analysts defended DraftKings on Tuesday, saying SBTech brings minimal worth to DKNG inventory. Credit Suisse additionally stated the corporate is at the moment working its betting platform on Kambi, a wholly separate supplier of know-how.

Blow To DraftKings Image

Additionally, Hindenburg estimates roughly 50% of SBTech’s income continues to come back from markets the place playing is unlawful.

One former worker instructed Hindenburg: DraftKings’ subsidiary SBTech has “sold to plenty of mobs.”

If true, the revelations are in sharp distinction to the clear picture of DraftKings’ brand-conscious companions. Among them: the NFL, NBA, NASCAR, UFC and PGA.

Hindenburg additionally stated {that a} former worker instructed them that earlier than the SPAC merger, SBTech tried to distance itself from its black-market dealings. Illicit buyer relationships shifted into a brand new entity referred to as BTi/CoreTech.

“The CEO selected to run BTi/CoreTech was formerly an executive of a ‘binary options’ gambling firm raided by the FBI and subsequently charged by the SEC for deceiving U.S. investors out of over $100 million,” Hindenburg stated.

Former SBTech workers referred to as BTi/CoreTech a “front,” in accordance with the Hindenburg report. They additionally stated the break up preserved SBTech’s (and now DraftKings’) illicit enterprise whereas shielding the general public firm from scrutiny.

“For all practical purposes, it appears that BTi/CoreTech functions as DraftKings’ undisclosed illegal gaming division,” the report stated.

DKNG Stock

Shares gapped down 4% to 48.55 on the stock market today. DKNG inventory fell effectively under its 50-day moving average, which itself is sloping downward, in accordance with MarketSmith chart analysis. Shares fell as a lot as 12% intraday, earlier than regaining a few of these losses.

Its relative strength line can also be trending downward. DraftKings’ RS Rating is simply 12 out of a potential 99. Its EPS Rating is 11, because it has but to put up a revenue.

DKNG stock is 26% under the all-time excessive of 74.28 it notched on March 22.

Rival Penn National Gaming (PENN), which operates the Barstool sports activities app, misplaced 2%. MGM Resorts (MGM), with its BetMGM sports activities playing app, was flat.

Among prime meme shares, AMC rose 5.5% whereas GameStop misplaced 7%.

Follow Adelia Cellini Linecker @IBD_Adelia.


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