When Hindenburg Research posted a negative report against DraftKings (NASDAQ:DKNG), the stock fell. The research firm is convinced that DKNG stock has extensive dealings in black-market gaming, money laundering, and organized crime.
DKNG stock is one of the few post-SPAC stocks that avoided the IPO route. Other than facing competition in the online gambling market, the firm is a low-risk growth stock. Conversely, Hindenburg is short on DKNG stock and is not always right on bearish bets. For example, it was bearish on GrowGeneration (NASDAQ:GRWG), a home improvement retail firm, when the stock traded at around $15. Since then, GRWG stock traded as high as $67.75 this year.
The rumors of illegal dealings are nothing new. Chances are high that DKNG stock is already priced in the risk. NASDAQ’s underperformance in the last week is likely a bigger risk to the stock than the bearish report.
If Reddit’s WallStreetBets wants to short-squeeze the research firm, it could accumulate the stock to bid the price higher. Fortunately for Hindenburg, the forum is busy buying AMC and GME stock instead.
The online gambling market has ease of entry and no moat. DraftKings is ahead of the competition, so it has a good chance of protecting its market position. DKNG stock looks like a buy after the recent dip.
