DraftKings stock finished lower by 4.1% on Tuesday after short seller Hindenburg issued a scathing report. It accused SBTech, a unit of the company, of operating in markets where sports wagering is not permitted, money laundering and having links to organized crime.

In addition to allegations that SBTech operates in China, Thailand, and Vietnam where sports betting is barred, and that the company has ties to a triad crime boss, Hindenburg notes DraftKings’ recent market value is in excess of rivals FanDuel, Supergroup, and Wynn Interactive combined.

The research firm calls that an “extremely rich valuation” when considering the company may not be profitable until 2025.

Wood’s ARK buys the dip in DraftKings again

While Hindenburg said it’s short DraftKings, other investors used Tuesday’s retreat to add to long positions.

Cathie Wood’s ARK Investment Management bought $42.2 million worth of the name yesterday, or 870,299 shares. The ETF issuer allocated about 688,700 of those shares to the ARK Innovation ETF. The remainder went to the ARK Next Generation Internet ETF.

ARK has been gobbling up DraftKings stock for months, and is among the largest institutional holders of the firm. The stock is the 17th largest holding in the famed ARK fund. The ARK Fintech Innovation ETF also holds DraftKings, but Tuesday’s buying in the name wasn’t directed to that fund.

This isn’t the first time Wood’s firm used a decline in a stock prompted by short sellers to add to a position. In April, the fund issuer defended mobile games platform provider Skillz following a spate of bearish research, using weakness in that name to buy the shares.

Several research firms in defense of DraftKings

Jefferies analyst David Katz said the crucial matter is whether or not DraftKings adequately disclosed SBTech’s market exposure and whether that exposure remains today. While noting the matter is unresolved and raises a series of key questions, the analyst keeps a buy rating and $75 price target.

Truist analyst Barry Jonas said it’s unlikely the US and other regulators will deny DraftKings gaming licenses as a result of the controversy, and that SBTech isn’t a meaningful contributor to the parent company’s revenue. He keeps a hold rating and $54 forecast.

Morgan Stanley’s Thomas Allen says unregulated international markets probably account for just 8% of DraftKings revenue, and that SBTech will decline to 5% of the company’s sales in 2025.

Allen adds that if DraftKings sees fit to dispose of SBTech’s legacy assets, it won’t affect overall forecasts. Allen rates the stock overweight with a $58 target.

Editing by Rachel Hu