DraftKings to “vigorously defend” Hindenburg claims as SEC triggers investigation
US operator downplays analyst claims over SBTech operating activity but highlights potential for “significant damages” arising from litigation
DraftKings is being investigated by the US Securities and Exchange Commission (SEC) over its acquisition of SBTech after an explosive short-seller report was published by Hindenburg Research in July.
In its Q2 2021 earnings report filing, the Boston-headquartered operator confirmed the presence of two class action lawsuits filed in the US District Court for the Southern District of New York by law firms acting on behalf of investors.
Lawyers alleged that DraftKings issued false or misleading statements and failed to disclose pertinent information pertaining to its in-house sports betting supplier SBTech to investors.
The claims centre on the July report compiled by New York-based Hindenburg Research, which suggested investors offload DraftKings stock due to the alleged overseas black-market activity of SBTech.
Hindenburg claimed that 25% of DraftKings revenue post-merger came from the SBTech business.
At the time, DraftKings defended its proprietary technology provider, suggesting the report was written “by someone who is short on DraftKings stock with an incentive to drive down the share price”.
In the immediate aftermath of the report, DraftKings share price tumbled 11%, but later rebounded.
DraftKings explained in its latest filing: “The allegations relate to, among other things, allegedly false and misleading statements and/or failures to disclose information about the company’s business and prospects.
“The company intends to vigorously defend against these claims,” DraftKings added.
The operator was issued with a subpoena by SEC investigators on 9 July concerning certain allegations raised in the Hindenburg Report.
The subpoena, DraftKings confirmed, called for documents relating to the allegations, however it has not disclosed explicitly which Hindenburg claims are under scrutiny by SEC investigators.
“The company intends to comply with the related requests and is cooperating with the SEC’s ongoing inquiry,” DraftKings added.
“Despite the potential for significant damages, the company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period.”
DraftKings will also have to defend itself against claims from four other high-profile litigations in areas including the alleged illegality of DFS contests, as well as a thousand-strong “mass arbitration” lawsuit filed by an unnamed law firm.
Patent-infringement lawsuits filed last month from Interactive Games LLC and Winview Inc were also listed by the operator as being “vigorously” defended by the firm.