Shares of online betting company DraftKings (NASDAQ:DKNG) fell as much as 5.6% in trading Friday after the company and insiders priced a share sale. At 1:40 p.m. EDT, shares were still down 3.8% for the day.
The most notable news was that a public offering of 32 million shares of stock was priced at $52 per share. This includes a sale of 16 million shares by DraftKings and a 16-million share sale by company insiders.
Traders may be reacting to the stock price, which was higher than where shares closed yesterday. But they also can't be happy about the sale. Insiders are cashing out $832 million of stock, which is a big number for a growth stock that only recently hit public markets.
The other news that can't be good for DraftKings is more COVID-19 cases in the NFL. At least three teams disclosed positive cases this week and that could impact both short-term betting and the long-term return of sports more broadly.
Investors who are bullish on the online gambling business should be most concerned that DraftKings' insiders seem to be jumping ship. They know the most about the inner workings of the company; if they want to sell shares, it makes sense that normal investors should as well. I'm not buying the dip today and see this week's news as a warning sign for DraftKings' long term.