The Israeli who helped launch the SPAC wave has a problem

Shalom McKenzie is one of the youngest and least famous billionaires living in Israel. According to Forbes magazine’s updated billionaire list published in April of this year, the 44-year-old McKenzie has a net worth of $1.7 billion, putting him just below Colmobile Chairman Shmuel Harlap in the rating, and higher than Check Point Software Technologies Ltd. (Nasdaq: CHKP) co-founder Marius Nacht. MecKenzie was born in Bat Yam but spent part of his childhood in the United States with his parents. He now lives in Savion, is married and has four children. MecKenzie jumped into the ranks of Israel’s richest companies after merging the company founded by SBTech, a provider of technology solutions for online sports betting and gaming, in late 2019 with US sports betting company DraftKings. In a three-way deal, the combined company became Nasdaq-listed despite its merger with SPAC, Diamond Eagle, worth $3.3 billion. In the merger deal, McKenzie became the largest private shareholder in DraftKings (Nasdaq: DKNG), with an 11.3% stake in the combined company. But last month, MecKenzie’s SBtech was the focus of a negative report from investment firm Hindenburg, which specializes in short positioning. The report rocked the DraftKing stock price since its release. Founded in 2012, the merger and success of DraftKings began running daily fantasy sports where surfers could bet on the performance of baseball players, and later on players in other sports. The company exploited a loophole in the law that did not define fantasy sports as gambling. The company’s business expanded after a US Supreme Court decision in 2018 enabled other states, besides Nevada, to allow betting on sports results, which more than half of the states in the US have now done DraftKings wanted to buy SBTech and form a merger that would give it control of the technology that operate online betting systems. After a merger with SPAC Diamond Eagle was proposed, the idea of ​​a tripartite merger began to take shape, including a meeting in Tel Aviv between MecKenzie and Harry Sloan, the SPAC sponsor, in June 2019. The merger, as we mentioned, took place in April of last year. It was greeted with enthusiasm, and DraftKings’ stock price soared from an initial price of $10 to a peak of $72 in March of this year. The addition of superstar Michael Jordan and supermodel Gisele Bundchen as private investors and advisors to the company contributed to the stock price’s surge. In fact, the success of the Draft King merger is cited as one of the reasons for the flood of SPAC mergers on Wall Street last year. Related Articles Ormat’s attorney general takes leave amid allegations Ormat Technologies refutes allegations of graft, short seller accuses Ormat of “dirty dealings in clean energy” MecKenzie SBTech was founded in 2007. The company is registered in Gibraltar, later operated as a company On the Isle of Man. SBtech development activity in Bulgaria and Ukraine, with management in Israel and commercial support in London. At the time of the merger with DraftKings, SBtech employed about 1,200 people worldwide. In 2018, it generated revenue of €94 million and net profit of €26 million. SBtech’s clients are gambling operators, lotteries, casinos and horse racing companies, which offer them a sports betting management system, including marketing and other tools. Among the clients were the Czech National Lottery and the Oregon Lottery. SBTech has earned a percentage of the income from gambling users of its technology. According to a Hindenburg Research report last month, about half of SBTech’s revenue came from websites in countries where gambling was illegal, such as Vietnam, Malaysia, Thailand, China and Iran, which are also subject to US sanctions. Gambling sites in these countries are run by criminal gangs. According to Hindenburg, her report is based on interviews with former SBTech employees, online research, and an examination of filings with US authorities. The report claims that in recent years SBTech has tried to hide its activity in Asian countries where gambling is illegal, so as not to harm its entry into the US market. The concealment, the report says, was done by transferring this activity to a connected company called BTi (which later changed its name to CoreTech), which also operates out of Bulgaria. The connected company was set up by the person described in the rebot as MecKenzie’s right-hand man, whose CEO was an Israeli who once ran the binary options platform. The Hindenburg Research report, published in mid-June, led to a drop of more than 11% in the share price of DraftKings, but the share price subsequently recovered, before falling again, among other things, after reports of a series of US law firms planning to raise Class actions against the company based on the Hindenburg Research Report. On the other hand, there are also those who support stocks, such as ARK Investment Management guru Catherine (Cathy) Wood. ARK has increased its investment in DraftKings since the case broke; Her stake in the company is estimated at $600 million. As for MecKenzie, according to US Securities and Exchange Commission filings, between June 2020 and the publication of the Hindenburg Research report, he sold $588 million worth of stock. He transferred most of his remaining property, which is worth about $1 billion, into a trust fund for his family. Replies No response was received from Shalom McKenzie. On behalf of DrafKings, Globes was told that “The complaint against DraftKings, which has not been filed, is a complaint over a report recently published by a short seller with a financial incentive to lower the share price of DraftKings. Prior to our business merger with SBTech, DraftKings conducted a comprehensive review of DraftKings’ practices their work and we were satisfied with the results.” Published by Globes, Israeli business news – en.globes.co.il – on July 18, 2021 © Copyright Globes Itonut (1983) Ltd. 2021