Sportradar sinks as short sellers raise illegal market client concerns

Sportradar (SRAD) was trading lower this morning after Callisto Research disclosed a short position and alleged the company’s “ties to illegality pose an existential threat.” The stock fell further after a second short seller, Muddy Waters, issued its own report claiming Sportradar’s clients are operating in illegal markets.

Responding to the claims, Sportradar told The Fly the short reports contain “factual inaccuracies” about the company, and it “unequivocally” challenges the assertions.

CALLISTO SHORT REPORT: Callisto Research said on Wednesday that it is short Sportradar, “a self-styled ‘Sports Integrity’ leader with ties to illegal gambling, sanctioned parties, criminals, and a completely fake regulator.” Callisto told investors it believes “Sportradar’s ties to illegality pose an existential threat.”

“Through examination of hundreds of gambling platforms, we found evidence suggesting that over 270 individual platforms are using Sportradar’s products or services, or explicitly claiming to do so, while operating illegally in regulated or prohibited gambling markets. Many of these operators have no license whatsoever. We believe this exposure is material… These relationships are incompatible with the regulatory requirements Sportradar must conform to in key markets. We have shared our findings with multiple regulators in North America and Europe. Three US gambling regulators have already commenced reviews. We believe Sportradar will have to choose between surrendering its revenue from illegal operators or losing its licenses in Europe and North America. If we are correct, we predict over 70% downside from SRAD’s current valuation,” the report reads.

MUDDY WATERS SHORT REPORT: Not long after Callisto published its report, Muddy Waters announced that the firm was also short Sportradar. Muddy Waters told investors it finds the company’s claim that it monitors illegal market activity “very closely” to “be a lie,” “contradicted not only by our undercover investigation but by SRAD’s own website code, by the testimony of fifteen current and former employees we interviewed, and by the exposed infrastructure of a business model that depends on illegal operators to survive.”

The short selling firm added, “Our research finds that SRAD has actively aided and abetted illegal gambling across the world’s black and grey markets – not as an accident or an oversight, but as a business strategy. We estimate that illegal operators today deliver approximately 20-40% of total revenues. Using two proprietary code-analysis methodologies developed with cybersecurity experts, supplemented by extensive interviews with former SRAD sales executives, we identified nearly 50 companies as current or recent SRAD clients and collaborators who are operating in illegal markets.”

FACTUALLY INACCURATE: Responding to today’s short seller claims, a Sportradar spokesperson told The Fly that, “A short report issued today contains factual inaccuracies about the company, and we unequivocally challenge these assertions. The report demonstrates a fundamental misunderstanding of our business and the industry and was authored by a short seller trying to erode shareholder value and profit from stock disruption. Sportradar works exclusively with licensed operators, follows strict global compliance, and due diligence standards, and we stand by our independently audited financial statements, risk disclosures, and information provided to investors and regulators. We conduct our business with the highest ethical standards consistent with company policies, laws and regulations.”

PRICE ACTION: Shares of Sportradar have dropped about 27% to $12.37 in afternoon trading.