Michael Burry is investing in sports betting stocks, announcing today that he has taken long positions in DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT), which owns FanDuel.
Burry, a highly regarded investor known for his previous role at Scion Asset Management, views DraftKings as a promising company undergoing a transformation, while recognizing that Flutter has faced challenges, yet remains fundamentally strong.
“DraftKings is evolving positively as a business, and I see significant value in its upcoming transition,” he stated in a Substack post. “Flutter has faced some issues with capital allocation in the past, but it remains a solid company with impressive scale.”
News of Burry’s recent acquisition of DraftKings shares, reportedly initiated at around $26, arrives as several prominent investors, including Cathie Wood, have reduced their investments in the sports betting market.
Burry on DraftKings and Flutter: A Focus on Prediction Markets
The stock prices for Flutter and DraftKings have declined by 61.2% and 36.3% respectively over the past year, largely attributed to emerging prediction markets like Kalshi and Polymarket. Flutter has also faced other difficulties, including the unexpected resignation of former CEO Amy Howe and news of significant layoffs in June.
Statistics indicate that the trading volume on yes/no exchanges is surging, fueled in large part by a trader interest in sports derivatives. However, Burry argues that prediction markets currently exploit a “loophole economy,” benefiting from a lax regulatory environment that is expected to tighten over time.
“Prediction markets operate in a regulatory gray area adjacent to an industry that is heavily monitored and taxed,” Burry noted. “Over time, these markets will fall under more stringent regulations and taxations.”
With initiatives like FanDuel Predicts and DraftKings Predictions, these gaming companies are gaining traction in the prediction market arena. Nevertheless, should robust regulations emerge, these operators are expected to leverage their established positions in the iGaming and online sports betting sectors, making them less susceptible to constraints faced by companies like Kalshi.
Burry’s Longstanding Interest in Gaming Investments
DraftKings and Flutter are not Michael Burry’s first interactions with gaming stocks. Burry, famously portrayed by Christian Bale in the film “The Big Short,” has held positions in Las Vegas Sands (NYSE: LVS) and Wynn Resorts during the pandemic’s early days, a bold move given the state of casino stocks at that time.
In 2023, Burry’s hedge fund also invested in MGM Resorts International (NYSE: MGM), which represented over 7% of the Scion portfolio at one stage.
Earlier this year, he suggested MGM and Wynn as potential “Plan B” acquisition opportunities for GameStop (NYSE: GME), another firm in which he is a significant shareholder. Following this, the video game company expressed interest in acquiring eBay (NASDAQ: EBAY).