DraftKings CEO Claps Back At Famed Short Seller Jim Chanos Following Bearish Comments

Draftkings Inc DKNG has been in free fall over the last three months, trading down by nearly 50% since the beginning of September. 

Short seller Jim Chanos added some fuel to the DraftKings fire when he announced that he has been short the stock for "most of 2021."

"You can bet on basketball and football to your heart's content but this business model is flawed," Chanos said Thursday on CNBC.

Chanos cited outrageous marketing spending as the core of his short thesis. 

"If you quadrupled DraftKings' revenues and gross profits ... and every state has sports betting and then some and it grows and you take their marketing spend — which is currently over 100% of revenues — you take it to 10% of revenues, which is their target. And you keep the overhead at today's level — you don't add anything. DraftKings would still be losing $200 million a quarter or $800 million a year," Chanos said.

"That is completely and totally insane."

From Last Month: Why Jim Chanos Is Still Short Tesla And This Tech Stock That's Up 15% YTD

He noted that a lot of high-growth stocks are trading at stretched valuations, but focused on the valuation of DraftKings. 

"DraftKings has a valuation right now of 30 times run-rate revenues," Chanos said.

DraftKings CEO Jason Robins took to Twitter Thursday afternoon to fire back at Chanos. He raised concerns that Chanos may have "forgotten how to do math" in response to the short seller's valuation comments. 

DraftKings is currently trading with a price-to-sales ratio of 10.857, according to data from Benzinga Pro.

DKNG Price Action: DraftKings has traded as high as $74.38 and as low as $31.41 over a 52-week period.

The stock closed up 0.19% at $31.30 Thursday.

Photo: World Poker Tour from Flickr.