A report by Hindenburg Research has claimed that DraftKings’ technology subsidiary earns as much as half its revenues from illegal gambling markets, the latest move by the short seller to target companies taken public through a special-purpose acquisition company.

Shares of the sports betting company fell more than 7 per cent after the report was released Tuesday.

DraftKings’ April 2020 public listing is widely considered an early accelerant of the latest Spac boom. It merged with the blank-cheque company Diamond Eagle as well as a B2B gaming services company called SBTech.

In the report released on Tuesday, Hindenburg claimed that SBTech has extensive history in operating in illicit gambling markets, including in China and Iran, and that as much as half of its current revenues come from jurisdictions where the activity is not legal.

Hindenburg said it had taken a short position in DraftKings, meaning it profits if DraftKings’ stock price falls. The firm cited interviews with an unspecified number of former employees, its own analyses of Securities and Exchange Commission filings and back-end internet infrastructure as evidence for its claims.

DraftKings said in a statement: “This report is written by someone who is short on DraftKings stock with an incentive to drive down the share price. Our business combination with SBTech was completed in 2020.

“We conducted a thorough review of their business practices and we were comfortable with the findings. We do not comment on speculation or allegations made by former SBTech employees.”

DraftKings has emerged as one of the most successful businesses to go public through a Spac, with its shares up more than 400 per cent from the $10 price at which blank-cheque companies list.

Hindenburg said that company insiders had benefited from the huge increase in DraftKings’ share price by selling a combined $1.4bn worth of stock.

According to filings with the SEC reviewed by the Financial Times, Shalom Meckenzie, the founder of SBTech, has sold out of or transferred almost his entire 11 per cent stake in the company.

Meckenzie has sold close to $568m worth of shares starting in June 2020, and last month transferred the majority of his remaining stake to a trust for his family, which at the current share price is worth almost $1bn.

Meckenzie could not immediately be reached for comment. Citing evidence from an Oregon public records request and interviews with former employees, the short seller report claimed that SBTech operated in Iran for as long as five years, and continues to operate in China despite strict regulations against online wagering.

SBTech has previously denied that it conducted business in Iran, according to a statement provided in 2019 to the Statesman Journal newspaper in Salem, Oregon.

DraftKings originated as a daily fantasy sports outfit before expanding to offer sports betting services, particularly after the US Supreme Court struck down a federal ban on sports wagers in 2018. Since then, more than half of US states have legalised the practice, sparking a gold rush among betting operators around the world to focus on the American market.

The Boston-based company has also benefited from the sharp rise in online gambling during the coronavirus pandemic. As DraftKings has grown over the past year, the company has added A-list celebrities to its board of directors, including basketball legend Michael Jordan and supermodel Gisele Bündchen.

Hindenburg has focused on companies that have listed via Spacs, including electric vehicle start-up Nikola. The short seller has also taken aim at Lordstown Motors, an electric truckmaker that has recently warned it could fail, and Clover Health, a healthcare company that has since become a popular meme stock.

Other short sellers, including legendary investor Jim Chanos, have raised concerns about the Spac boom and compared it to the dotcom bubble.