DraftKings investors invited to seek damages in aftermath of Hindenburg report
Lawyers claim executives and company violated federal law by misleading investors about alleged SBTech black-market operations
DraftKings has been targeted for potential class action lawsuits by five US law firms following the publication of a controversial report into the operating activity of proprietary sportsbook provider SBTech.
The Portnoy Law Firm, Johnson Fistel LLP, Schall Law Firm, Pomerantz LLP and Pennsylvania-based lawyer Howard G Smith have all separately opened investigations into DraftKings by inviting investors to contact them and participate in the claim.
Lawyers allege that DraftKings issued false or misleading statements and failed to disclose pertinent information on its SBTech subsidiary to investors.
The Howard G Smith firm alleges DraftKings executives violated federal law by misleading investors in respect of the operator’s “financial condition”, namely certain aspects of its relationship with SBTech.
The lawyers all state the investigations could lead to a class action lawsuit for damages against the US sports betting heavyweight from investors who bought DraftKings stock prior to 15 June 2021.
The investigation centres around a report published on this date by New York-based investment analysis firm Hindenburg Research.
In the Hindenburg Research report, the short-seller suggested investors should offload DraftKings stock due to the alleged black-market activity of SBTech and delivered an explosive dossier of alleged illegal business activities.
Hindenburg claimed that 25% of DraftKings revenue post-merger came from the SBTech business.
DraftKings defended its in-house technology provider, suggesting the report was written “by someone who is short on DraftKings stock with an incentive to drive down the share price”.
Publication of the report prompted an 11% slump in DraftKings’ share price, which has since recovered.
DraftKings board member Shalom Meckenzie is understood to have divested $34m in DraftKings stock just one day before the Hindenburg report was published.
The Boston-based sports betting, casino and DFS operator has not yet responded to the potential damages claim after being contacted for comment by EGR.