DraftKings Stock Falls to Lowest Level Since 2023

This past Thursday, DraftKings' stock fell to its lowest level in more than three years. The shares fell to $18.58 after closing at $19 on Wednesday. This marks its lowest stock price since April 2023. The stock has lost almost half its value over the past year due to slower growth and the emergence of prediction market platforms like Polymarket and Kalshi. 

The same happened to other sports betting titan FanDuel and its parent company, Flutter Entertainment, as their stock fell to a record low last week. 

Last month at the Wells Fargo Consumer conference, DraftKings CEO Jason Robins said the sports betting handle grew 15% year over year during the first three weeks of September, an encouraging result.

The company fell short of Wall Street revenue estimates because bettors were more successful and the company spent more on promotions. Additionally, DraftKings posted a $67.6 million net loss after posting a profit north of $157 million last year. The company has said that its sports betting business is on track to generate $1 billion in adjusted EBITDA this year. 

Investors Wary as DraftKings Expands Into Prediction Markets

While the company has seen success with betting coming in at the start of the NFL season, investors are wary of profitability as DraftKings also breaks into the prediction market space and is set to spend up to $300 million more this year. 

DraftKings has been a standard bearer in the online sports betting space. However, it's struggling to keep up with prediction market titans Polymarket and Kalshi. DraftKings entered the prediction market space last year, launching its own exchange, DKeX, this past June. Robins claims DraftKings is approaching a double-digit share of sports prediction market volume after fivefold growth in annualized trading volume from April to July. 

That said, according to Needham, Kalshi accounted for 76% of sports prediction market volume during the opening week of the NFL season, while DKeX was at 3%. 

“We see a headline that is positive on predictions, and everyone in the company [celebrates] and our stock goes down. Or we see the Ninth Circuit rules against predictions, and we’re like, ugh, and the stock pops,” Robins said while at the Front Office Sports’ Asset Class conference in September. 

DraftKings Also Faces Scrutiny Over AI Use

Right now, DraftKings is under scrutiny after a New York Times report alleges it uses AI and machine learning to target promotions toward players more likely to lose. The Massachusetts Gaming Commission said it will look into DraftKings, and the Michigan Gaming Control Board is also looking into platforms like DraftKings for similar reasons, but didn't mention DraftKings specifically.