Hindenburg launches yet another Spac attack
While most short sellers are reeling from a painful decade of soaring stock prices and the recently formed Reddit trading army, Hindenburg Research has carved out its own niche.
The swashbuckling short seller led by Nate Anderson has laid waste to the Spac industry by targeting some of its most celebrated companies. Its latest report takes aim at DraftKings, the golden goose of the blank-cheque boom.
Hindenburg released a report on Tuesday claiming the bookmaker’s technology subsidiary SBTech gleans as much as half of its revenues from illegal gambling markets. Shares of DraftKings fell by more than 7 per cent following the report’s publication.
The New York-based firm also pointed to the fact that company insiders had benefited from the huge increase in DraftKings’ share price — which peaked at $74, more than seven times the $10 price at which Spacs commonly list — by selling a combined $1.4bn worth of stock.
The sports betting platform, whose board includes A-list celebrity advisers like basketball legend Michael Jordan and supermodel Gisele Bündchen, went public in a highly lucrative three-way Spac deal last April.
Its success is widely considered to have helped spawn a surge in the popularity of Spacs that has only recently begun to lose steam.
Whether or not Hindenburg’s accusations hold any weight is unclear. The firm holds a short position in DraftKings, meaning it stands to profit if the gambling group’s stock price takes a dive.
In its response to the allegations made by the short seller, DraftKings said that Hindenburg had “an incentive to drive down the share price”, adding that it “conducted a thorough review of [SBTech’s] business practices and we were comfortable with the findings”.
The sports betting company joins other high-profile start-ups targeted by Hindenburg, including electric truckmaker Nikola and rival Lordstown Motors, both of which listed through Spac deals.
Anderson’s scepticism is shared by regulators who have started to keep a close eye on Spacs.
Whatever the motives of Anderson and his team, Wall Street’s dwindling excitement for Spac deals means there’s never been a better time to strike.