Ark Invest; Insider
- Cathie Wood's ARK Invest bought a $40 million stake in DraftKings on Wednesday after the stock tumbled 8.2%.
- Compared to pre-dip Monday prices, ARK investors saved $3.3 million on the trade.
- But on Thursday, investment research firm Hedgeye said DraftKings was one of the best short ideas on the market.
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Cathie Wood's ARK Invest bought an additional $40 million stake in DraftKings on Wednesday after news of a buyout bid for UK sports bettor Entain sent shares tumbling 8.2%.
Two ARK-managed ETFs bought a combined 759,819 shares in the sports betting company a day after the dip. At Wednesday closing prices, the buy was worth just under $40 million. Compared to pre-dip Monday prices, ARK investors saved $3.3 million on the trade.
Wood's ARKK Innovation ETF now has 10.6 million DraftKings shares and her ARKW Next-Generation Internet Fund has 3.6 million shares.
On Tuesday, CNBC reported that DraftKings had approached Entain with a $20 billion cash-and-stock buyout offer, months after the UK company had rejected a similar $11 billion offer from MGM Resorts. The news propelled Entain shares up 18% but crushed DraftKings stock, which fell more than 8%.
DraftKings has been one of Wood's go-to stock picks in 2021, with her funds buying dips and sometimes giving the stock a boost with its buy announcements.
But the company has attracted interest from short-sellers since its public debut via SPAC in 2020, including one short-seller alleging exposure to black-market operations stemming from the SPAC. The company has denied the allegations.
On Thursday, investment research firm Hedgeye said DraftKings was one of the best short ideas on the market, citing its "lofty" valuation, aggressive competition, and a tough industry. Hedgeye analysts warned that the stock could be facing a 20%-25% downside risk.
But general Wall Street sentiment seems more sanguine. Of the 25 analysts covering DraftKings listed on FactSet, 17 called the stock "buy" or "overweight," with the other 8 saying "hold." None were as bearish as the short-sellers.