DraftKings Rally Sparks Wave of Insider Selling

Posted on: May 24, 2023, 06:17h. 

Last updated on: May 30, 2023, 02:30h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

There’s an old financial market saying that goes, “Sell in May and go away.” DraftKings (NASDAQ: DKNG) insiders aren’t going away. But they sure are selling their company’s shares this month.

DraftKings insiders
DraftKings founders (from left) Paul Liberman, Jason Robins and Matthew Kalish, seen in Boston in 2015. They’re among the insiders selling shares of the gaming company. (Image: Boston Globe)

With the shares up 11% in May and 112% year-to-date, insiders, including cofounders Matthew Kalish and Paul Liberman, are reducing their stakes in the gaming company. Kalish and Liberman cofounded  DraftKings with CEO Jason Robins, who controls the vast majority of the sportsbook operator’s voting stock.

Recent Form-4 filings with the Securities and Exchange Commission (SEC) indicate that DraftKings President Kalish engaged in four transactions between May 8 and 9 — three of which the SEC classified as dispositions, including an outright sale of 36,942 shares on May 8. That trimmed his stake in the daily fantasy sports (DFS) provider to 2,754,910 shares, and followed three outright sales in March, according to SEC filings. As of May 9, Kalish owned 2,783,219 shares of DraftKings common equity.

For the week ending May 12, the four largest stock sales by gaming industry insiders were all committed by DraftKings executives, according to Form Fore — a research firm that specializes in analysis of Form-4 documents. Kalish led the way with $8.98 million in sales that week, while Robins followed at $4.86 million. During that week, Liberman dumped $3.24 million worth of the company’s shares, while CFO Jason Park pared his stake by $2.80 million.

Speaking of Liberman, Park…

Following two March sales, Liberman sold another 133,333 DraftKings shares on May 9, reducing his position in the common equity to 1.39 million shares. But that figure later increased to 1.72 million following an acquisition, according to the regulatory filings.

In terms of sheer activity, CFO Park appears to be one of the busiest insider sellers of DraftKings. Following four February transactions marked as sales, and another three in April, the gaming company’s financial boss engaged in seven sales just this month, according to the SEC.

While Park has been an active seller of his employer’s equity by way of automated 10b5-1 plans, the company’s recent proxy filing with the SEC indicates he owns north of 1.42 million shares. That figure could increase in the future because DraftKings — as is the case with many emerging growth companies — frequently uses stock as a form of compensation.

Kalish, Liberman, and Robins have a $1 annual salary each. But they also received north of $120 million combined last year in equity-based compensation.

DraftKings Insider Sales Cause for Scrutiny, But…

Due to higher ownership of the stock among retail investors, DraftKings insider sales often draw criticism and scrutiny on social media. Indeed, Guru Focus data confirm that since the start of 2023, the only insider transactions in the stock have been sales — no buys.

However, closer examination is warranted. The volume of insider sales at DraftKings has declined in notable fashion following a massive spike in the months following the operator’s 2020 initial public offering (IPO).

Additionally, while Kalish, Liberman, and Robins are ringing the register on portions of their holdings, they remain the three largest insider holders of DraftKings equity. Vanguard is the biggest institutional owner of the stock.