DraftKings Inc. (DKNG) opened the week down as much as 11.6% from Friday's close and finished trading down nearly 13% on Monday. The company closed the day at $18.05 per share, a far cry from its 52-week high of $74.38.
Argus Research firm downgraded DKNG from a buy to a hold last week, resulting in a large sell-off of shares. Among the reasons cited for the change were uncertainty surrounding 2022 growth and fierce competition from rivals MGM and Wynn Mobile Sports.
There are 34.6 million shares of DKNG held in ETFs, with the ARK Innovation ETF (ARKK), an ETF that aims to invest in disruptive companies like DKNG, holding close to 42% of those shares (14.46 million shares).
ARK Invest funds hold the other two top spots as well, with the ARK Next Generation Internet Fund (ARKW) holding 3.9 million shares and the Ark Fintech Innovation ETF (ARKF) holding 2.31 million shares.
The ETFs with the most DKNG exposure unsurprisingly include two ETFs focused on gambling—the $213 million Roundhill Sports Betting & iGaming ETF (BETZ), with a 5.19% weighting, and the iBET Sports Betting & Gaming ETF (IBET), with a 3.58% weighting.
The Jacob Forward ETF (JFWD) and the Roundhill MEME ETF (MEME) have enjoyed the greatest performance boosts in the last 30 days as holders of DKNG, with gains of 2.02% and 1.66%, respectively. However, given DKNG’s recent performance, it’s unlikely it was contributing much to the positive returns.
Vanilla ETFs make up the majority of strategies holding the stock, with 33, followed by active management ETFs at 16 and growth ETFs at nine.
Outlook For DKNG
Currently, 30 states have legalized sports betting, although only 18 allow bets to be placed online, which effectively places a cap on the market for DraftKings' growth. DKNG investors have long argued that the disruptive platform's growth would be a natural side effect of legalized online sports betting across America—a thesis not shared by all.
It is true that the sports betting market is expected to grow substantially in coming years (Bloomberg estimates it'll be worth $140.26 billion by 2028). But several states, including California and Massachusetts, are still unsure if online betting will be legalized in 2022. An additional 10 states, including South Carolina and Kentucky, have either already said no to sports betting becoming legal this year or have seen no action on that front at all.
As spring quickly approaches, the current Major League Baseball (MLB) lockout also looms large for DraftKings Inc. profits in the short term. The MLB announced this week that with both sides still in a stalemate, they could start canceling regular season games in the next few days.
Thirty-six percent of online bettors placed their money on baseball games, according to a 2019 survey conducted by The Fantasy Sports and Gaming Association (FSGA). National Football League games were the only other sport that received more bets. DraftKings' daily fantasy baseball offerings will also be halted until the MLB lockout is lifted and play resumes.
That said, 78% of Americans who play fantasy sports say they bet on sports games as well.