The decline of DraftKings (NASDAQ: DKNG) is now widely known. Its losing run will extend to eight days if it settles lower today. Even if the stock has lost about 19% in the last week and roughly 27% in the last month, a well-known brand is still purchasing the dip.
Longtime DraftKings shareholder Cathie Wood's ARK Investment Management purchased 511,049 shares of the gaming company on Wednesday, distributing the transaction among three of its actively managed exchange-traded funds (ETFs).
The gaming stock is now the 37th-largest component of the $7.17 billion ARK Innovation ETF (NYSEARCA: ARKK), the company's flagship ETF, after 350,315 DraftKings shares were added. By assets under management, ARKK, the largest ETF offered by ARK Invest, has increased by 55.84% so far this year.
While Robinhood Markets (NASDAQ: HOOD) is one of the top 10 holdings in the ETF, DraftKings is the only gaming-related business in the ARKK portfolio. Due to its increasing exposure to prediction markets, Robinhood is posing a threat to DraftKings and other sports betting companies.
In relation to Prediction Markets and DraftKings...
A large portion of the recent decline in sports betting stocks, such as DraftKings, has been ascribed to the skyrocketing amount of predictions and the football parlays offered by Kalshi, one of the industry leaders. A significant competitor in that space is Robinhood, a Kalshi partner, which said earlier this week that it had processed over four billion event contracts, with over half of that amount occurring in the recently finished third quarter.
For DraftKings and its rivals, there is more to the story. Because it's likely that turnover on those exchanges is being double-counted, increasing numbers that are equal to sports betting handles, some analysts think the prediction market volume thesis is exaggerated.
Similarly, some sell-side analysts claim that prediction markets had nothing to do with the true cause of the late September decline in sports betting equities. Customer-friendly NFL game outcomes are the true issue.
In September, which typically makes up half of operators' third-quarter handle, that situation was so evident that some analysts reduced their 2025 and 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA) projections for Flutter Entertainment (NYSE: FLUT), the company that owns DraftKings and FanDuel.
Additional ARK ETFs Including Stock in DraftKings
Returning to ARK Invest, it increased its holdings in the ARK Next Generation Internet ETF (NYSEARCA: ARKW) by 103,872 shares, making DraftKings the 31st largest holding in the ETF.
Additionally, the asset manager made DraftKings the 20th largest holding in the ARK Fintech Innovation ETF (NYSE: ARKF) by adding 56,862 shares of the gaming stock.
As of the end of the second quarter, Vanguard and BlackRock held 14.06% of the betting stock, making them the two largest fund owners of DraftKings.