Shares of DraftKings (DKNG 9.25%) fell as much as 13.4% in trading Monday after a COVID-19 outbreak threatened the MLB season. At 2:40 p.m. EDT, shares were still down 8.1% for the day.
As of the latest reports, at least 14 players and staff with the Miami Marlins have tested positive for COVID-19, and there's fear this could derail pro sports in the U.S. MLB, the NBA, and MLS are all resuming activity, although most have some sort of bubble in place. Among those leagues, this is the first major outbreak we've seen and isn't a great sign for sports returning in general.
DraftKings' stock is reacting strongly to this news because online betting is one way fans can stay engaged in sports when they aren't allowed at games. Online betting on platforms like DraftKings were hoping to find a new audience they could grow for years to come. That may be in jeopardy.
As much as this might be bad news on the surface, MLB's return to play has always been riskier than other sports. While the NBA, for example, created a bubble with all of its players in Orlando, MLB was flying teams all over the country. That was potentially a recipe for disaster that may already be playing out.
While this might be an incremental negative for DraftKings, I don't think it's a reason to change your investment thesis. Online gambling is still in its infancy, so if you're bullish on the industry there's no reason to change that opinion today.