DraftKings Rallies, But Wood’s ARK Invest Trims Stake

Posted on: August 8, 2022, 11:24h. 

Last updated on: August 9, 2022, 10:12h.

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

Cathie Wood’s ARK Investment Management rang the register on some of its DraftKings (NASDAQ:DKNG) stake on Monday.

ARK DraftKings
ARK Investment Management founder Cathie Wood. Her firm reduced its DraftKings position today. (Image: Getty Images)

After spending the first half of 2022 faltering, the stock is higher by 44.66% over the past month, providing investors with a decent opportunity to take profits or cut losses in the online sportsbook operator. Since the start of this year, the gaming name shed a third of its value.

Today, ARK sold 852,851 shares of DraftKings out of the ARK Innovation ETF (NYSEARCA:ARKK) — the issuer’s flagship exchange traded fund. The $7.93 billion ARKK still holds 16.32 million shares of the daily fantasy sports (DFS) company, valued at $293.12 million, according to issuer data. The stock is ARKK’s 15th-largest holding at a weight of 2.91% as of the close US markets today.

DraftKings remains a top 10 holding in the $1.13 billion ARK Next Generation Internet ETF (NYSEARCA:ARKW), commanding a weight of 4.65% in that fund. The sportsbook operator is also a top 10 component in the ARK Fintech Innovation ETF (NYSERACA:ARKF) at an allocation of 4.42%.

ARK’s First Recent DraftKings Sale

Wood’s asset management firm has long been a backer of DraftKings, adding the stock to the aforementioned ETFs last year and buying even amid steep declines.

Still, Wood remains undaunted. She has a long history of patience with growth stocks – her time line is often five years or more – and of buying dips in faltering names in which she has high conviction. That could be exactly what’s happening with DraftKings.

ARK’s partial sale of its DraftKings stake comes as the stock is up 30.62% over the past week. It also arrives just days after the company issued a buoyant 2022 revenue outlook, while telling investors it expects a significantly lower annual earnings before interest, taxes, depreciation, and amortization (EBITDA) loss than previously forecast.

The online sportsbook operator is now projecting 2022 revenue of $2.08 billion to $2.18 billion, up from a prior outlook of $2.05 billion to $2.17 billion. That implies year-over-year revenue growth of 60% to 68%. Analysts were expecting $2.1 billion. Boston-based DraftKings sees a 2022 EBITDA loss of $765 million to $835 million — better than the previously forecast loss of $810 million to $910 million.

ARK Ranks High Among DraftKings Investors

As of the end of the second quarter, Wood’s ETF issuer owned 25.27 million shares of DraftKings, making it the fourth-largest institutional owner of the shares.

ARK doesn’t shy away from gaming stocks. For example, the aforementioned ARK Next Generation Internet ETF owns 5.19 million shares of sports betting data provider Genius Sports (NYSE:GENI) and nearly 467,000 shares of Endeavor Group (NYSE:EDR).

Endeavor, the parent company of the Ultimate Fighting Championship (UFC), acquired the OpenBet sports wagering platform from Light & Wonder. OpenBet clients include DraftKings, FanDuel, William Hill, and WynnBet.