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Why Shares of DraftKings Popped 5.7% Today

By Travis Hoium – Oct 1, 2020 at 1:39PM

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A new ETF has this gambling stock moving higher today.

What happened 

Shares of online gambling company DraftKings (DKNG -0.41%) rose as much as 5.7% Thursday as investors bet some non-operating factors would drive shares higher. At 1 p.m. EDT shares were touching all-time highs for the stock. 

So what

The big news today is that a special purpose acquisition company, or SPAC, ETF has been launched on the New York Stock Exchange under the name Defiance Next Gen SPAC Derived ETF. The ETF aims to track the Indxx SPAC & NextGen IPO Index, which follows SPACs and IPOs of SPACs. 

Sports betting app on a smartphone on a table near a computer.

Image source: Getty Images.

This may sound like a strange reason for DraftKings' stock to rise, but this is an index that could hold a significant amount of DraftKings stock. If the ETF gains traction with investors it will buy shares as the ETF's assets under management grow. By extension, that could push DraftKings shares higher, or that's what traders are thinking today. 

Now what

To be clear, this does not impact DraftKings' operations in any way. This is a trading phenomenon and it could easily reverse course tomorrow. But sometimes when a stock enters a new index or an ETF is launched it can cause a short-term boost in a stock. That's what has happened with DraftKings' shares today and shares are now at an all-time high as a result. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$14.44 (-0.41%) $0.06

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