Hindenburg Research reveals DraftKings short position, says company is hiding black market operations

• Hindenburg Research revealed its latest short position in a report on Tuesday, setting sights on online betting company DraftKings.
• The short seller claimed DraftKings is hiding "black market operations."
• Hindenburg says 50% of DraftKings' SPAC partner SBTech's revenue comes from markets where gambling is banned.
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Short seller Hindenburg Research revealed its latest short position against DraftKings in a report on Tuesday.

Hindenburg said that one of DraftKings' SPAC merger partners, Bulgaria-based gaming technology company SBTech, "brings exposure to extensive dealings in black-market gaming, money laundering, and organized crime."

The short seller claimed that, according to their estimates based on SEC filings, "supporting documents," and conversations with former employees, roughly 50% of SBTech's revenue comes from markets where gambling is banned.

DraftKings did not immediately respond to Insider's request for comment about the report.

Hindenburg said the company's illicit customer relationships were shuffled into a newly formed "distributor" entity called BTi/CoreTech when DraftKings went public via a SPAC merger with Diamond Eagle Acquisition Corp. in April 2020.

The short seller has been a frequent critic of popular startups, many of which have gone public via SPAC. Previous targets include electric vehicle makers Nikola and Lordstown Motors, as well as Chamath Palihapitiya-backed Clover Health.

Hindenburg also noted that DraftKings insiders have dumped over $1.4 billion in stock since the company went public, and SBTech's founder personally sold around $568 million in shares.

Finally, the short seller argued DraftKings' business model of aggressively spending cash to acquire customers that may or may not be loyal to the platform could be a risk moving forward.

DraftKings stock traded down 7.80% as of 9:47 a.m. ET after news of the short-seller report broke.