Iconic stock seller Jim Chanos, founder of Kynikos Associates, said Thursday that he has shorted online sports gambling platform DraftKings (DKNG) - Get DraftKings Inc Class A Report and delivery company DoorDash (DASH) - Get DoorDash, Inc. Class A Report.
“DraftKings has a valuation right now of 30 times runway revenue,” he told CNBC. “You can believe in sports betting ... but this business model is flawed.”
That’s because of the company’s huge marketing outlays, he said.
“If you quadrupled DraftKings’ revenue and gross profit ... and take their marketing spending, which is currently over 100% of revenue, to 10% of revenue, which is their target, and you keep overhead at today’s level ... DraftKings would still be losing $200 million a quarter,” Chanos said.
“That is completely and totally insane.”
DraftKings' response to TheStreet Thursday: "Based on its 400 million class A shares outstanding, current trading price, debt and cash, and consensus revenue estimates, the accurate enterprise value to sales multiples for 2021 and 2022 are about 9 times and 6 times, respectively.”
He said has been short the stock for most of this year.
DraftKings recently traded at $28.26, down 9.7%. It dropped 48% over three months ended on Thursday amid valuation concerns.
As for DoorDash, Chanos cited its inability to produce profit during a period of heightened demand.
“You’re not making money in the pandemic, when everyone is ordering food and everyone is staying at home and you have a captive audience,” Chanos told CNBC. “If not now, when?”
He said, “If you’re not making a lot of money, and the capital markets turn a lot less friendly ... valuations get destroyed for money-losing companies when capital is not available.”
DoorDash recently traded at $153.25, off 7.8%. It was off 14% in the three months ended on Thursday.
Chanos made his name shorting energy company Enron before its 2001 collapse.