DraftKings Shares Face 35%-60% Drop, Warns Short Seller Spruce Point
DraftKings (NASDAQ: DKNG) shares may face significant drops, warns short seller Spruce Point Management. The firm estimates additional downside of 35% to 60%, with shares potentially declining to $14 to $22. Spruce Point points to prediction markets like Kalshi and Polymarket, and state regulators' concerns, as contributing factors.
Prediction markets, such as Kalshi, are gaining traction with surging volumes. Kalshi alone sees an average NFL handle of $277 million per week and $187 million per week for college football. Spruce Point believes this should raise concerns for DraftKings in the stock market today.
Spruce Point alleges that some sell-side analysts, including JPMorgan Chase, Wells Fargo, and Piper Sandler, have not adjusted their price targets for DraftKings' stock despite recent developments. This could lead to a wave of downgrades and investor disappointment in the stock market.
State regulators, like the Arizona Department of Gaming (ADG) and the Ohio Casino Control Commission (OCCC), have warned gaming companies that pursuing prediction markets could jeopardize their sports betting licenses. This precarious situation hampers companies' ability to respond effectively in the stock market today.
DraftKings is currently on pace to end an eight-day skid, but Spruce Point's warnings suggest potential challenges ahead. The company and investors should be prepared for significant downside, with shares potentially declining to $14 to $22 in the stock market today.
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