Article: Hindenburg Research Shorts One of the Biggest SPAC Winners: DraftKings

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Hindenburg Research Shorts One of the Biggest SPAC Winners: DraftKings

Michelle Celarier, 15 June 2021

Nate Anderson’s Hindenburg Research, the short activist firm that burst onto the scene last fall with an exposé of electric truck maker Nikola, is back with its fifth big takedown of a special-purpose acquisition company.

This time Anderson has set his sights on DraftKings, the online gambling site which went public in one of the hottest SPAC deals of 2020. His firm alleges that DraftKings has “extensive dealings in black-market gaming, money laundering, and organized crime.”

Although the company “has been heralded as the key SPAC ‘success story,’” Hindenburg wrote on Twitter, “we think it represents the dying embers left by yet another Wall Street loophole.”

Last year, DraftKings went public in a three-way merger with SPAC sponsor Diamond Eagle Acquisition and a Bulgaria-based gaming technology company called SBTech.

It was an immediate hit. Along with Chamath Palihapitiya’s SPAC deal with Virgin Galactic and the blank-check company merger with Nikola, which counted activist hedge fund manager Jeff Ubben as a key investor, the DraftKings deal helped ignite the SPAC boom that crashed earlier this year.

As of the time of the Hindenburg report, DraftKings’ stock was still up almost 400 percent since its deal announcement, which the report said was “fueled by retail enthusiasm over recent deregulation in the gambling market and helped in large part by its clean corporate image.”

The stock fell about 11 percent on the report before the market opened Tuesday, but it had recovered most of that during normal trading hours and was down only 4 percent at market close.

Other short sellers were blasé. “Connecting a gambling business with organized crime is like connecting the Pope with Catholicism,” said one short seller who nonetheless added that DraftKings is “a financial farce of a company.”

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