Hindenburg Research Report: DraftKings "hide black market operations"

[The Buzz]

DraftKings stock took a hit this morning after analysts at Hindenburg Research, a renowned short seller, said the betting group's merger with Bulgaria-based SBTech has opened it up to exposure linked to black-market gaming and money laundering.

Hindenburg said DraftKings, which went public last year via a three-way merger with special acquisition company sponsor Diamond Acquisition and SBTech, has "systemically skirted the law and taken elaborate steps to obfuscate its black market operations" as insiders "aggressively cash out amidst the market froth."

"SBTech offered DraftKings a turnkey sportsbook, complete with user management, customer support, and payment gateways," Hindenburg wrote. "It also looks to have exposed DraftKings shareholders to extensive black market dealings, money laundering and organized crime."

Also from the report:

SBTech accounted for ~25% of total revenue at the SPAC consummation and was the only positive contributor to operating income, providing both financial stability and technology to the deal.

Unbeknownst to investors, DraftKings’ merger with SBTech also brings exposure to extensive dealings in black-market gaming, money laundering and organized 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.

We estimate that roughly 50% of SBTech’s revenue continues to come from markets where gambling is banned, based on an analysis of DraftKings’ SEC filings, conversations with former employees, and supporting documents.

As one former employee told us, DraftKings’ subsidiary SBTech has “sold to plenty of mobs”, a sharp contrast to the clean image of DraftKings’ brand-conscious partners, including the NFL, NBA, NASCAR, UFC and PGA, and the company’s recent hire of supermodel Gisele Bundchen to advise on governance issues.

Prior to the SPAC merger, SBTech seems to have made a concerted effort to distance itself from its black-market dealings. Illicit customer relationships were shuffled into a newly formed “distributor” entity called BTi/CoreTech, with ~50 SBTech employees shifted across town to the new entity.

DraftKings responded, telling FOX Business:

"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," a company spokesperson told FOX Business. "We do not comment on speculation or allegations made by former SBTech employees."

Read the Hindenburg report here: https://hindenburgresearch.com/draftkings/

[PROFRBcom]

Gee. The same people who closed the affiliate accounts, and stole the players from, "black market affiliates" a few years back are involved in *GASP* black-market operations?

Say it ain't so!

Next thing you know, you will tell me something insane like public health officials don't always "follow the science" and sometimes have political motivations!!

[rmeeuwsen]

DK "We conducted a thorough review of their business practices and we were comfortable with the findings."

Similar corporate culture?!