Today, Judge Engelmayer dismissed with prejudice a putative securities class action filed against DraftKings, Inc., and denied Plaintiffs’ leave to replead. Plaintiffs’ Second Amended Complaint alleged that a company that DraftKings had acquired in the course of going public, SBTech (Global) Limited (“SBTech”), had secretly operated in “black-market” jurisdictions, thereby exposing DraftKings to regulatory and criminal risks. It further alleged that DraftKings made materially false and misleading statements about, and failed to disclose, SBTech’s violations of foreign law and their potential consequences.
Plaintiffs argued that DraftKings’s shares traded at artificially inflated prices until June 15, 2021, when a short seller, Hindenburg Research published a report that revealed SBTech’s ostensible operations in black market jurisdictions and the risks to which the merger with SBTech allegedly exposed DraftKings. That day, DraftKings’s shares fell 4.17%.
In dismissing the Second Amended Complaint, the Court focused on Plaintiffs’ reliance on the Hindenburg report without having verified the information contained in the report:
Continue Reading Judge Engelmayer Dismisses Putative Securities Class Action Because Allegations Were Based On Unconfirmed Allegations in Short Seller’s Report