DraftKings (NASDAQ:DKNG) has been tumbling since it reached a recent peak closing price on Sept. 9. at $63.67 per share. At $31.21 as of Dec. 2, DKNG stock is now down more than 50% since then. Moreover, since peaking at $71.98 on March 19, the stock is now down 57%.

DKNG shares initially moved higher after the company announced an all-stock purchase of Golden Nugget Online Gaming (NASDAQ:GNOG) on Aug. 9. So far, shareholders of DKNG stock are not that impressed. It’s possible they are concerned about share dilution at their company.

To make matters worse, the more DKNG stock falls, the less value GNOG shareholders will receive. They will receive 0.365 shares in DKNG for each GNOG share they own. So as DKNG stock falls, they receive less value for their GNOG shares.

Moreover, DraftKings’ financials are still under pressure. This could lead to more dilution concerns.

Where Things Stand at DraftKings

For example, DraftKings produced third-quarter earnings losses, showing that it is still burning through cash. Its adjusted EBITDA loss was $313.6 million. That is much greater than even its revenue of $212.8 million. For the past nine months, its ongoing EBITDA loss was $548 million.

This translates into large amounts of cash burn. For example, the company’s Condensed Consolidated Statement of Cash Flows in its latest 10-Q shows that operating cash flow produced $247.3 million in losses for the past nine months.

After deducting $118.7 million in other investing spending, the adjusted free cash flow loss was $366 million. This cannot keep up. At this rate, DraftKings is going to burn almost $488 million by the end of the year. Granted, the company has plenty of cash on its balance sheet.

As of Sept. 30, it had unrestricted cash of $2.394 billion. That implies it can keep on burning half a billion in cash flow each year for another 5 years or so.

But if it takes on Golden Nugget Online Gaming’s losses, that cash burn will increase. For example, GNOG reported that its nine-month operating cash flow losses were $29.5 million as of Sept. 30. That will take the total cash burn over $500 million next year.

Where This Leaves DraftKings

Investors hope that eventually, DraftKings can lower its huge marketing spending. That is what makes it lose so much money right now.

For example, during Q3, it spent $303.7 million on sales and marketing even though revenue was just $212.8 million. This is despite the fact that revenue rose 60% from $132.8 million during last year’s Q3. And last year, it spent $203 million on marketing.

So, the good news is that marketing spending fell from 153% of revenue last year to just 143% this past Q3. But the bad news is that as revenue rises, its marketing spending is still going up on an absolute dollar basis.

And in fact, the reality is the opposite. The only way to increase its revenue is to jack up marketing spending. All those ads on TV offering free money if you just make a bet is one way that this marketing spending goes. The idea is that once you make your first several sports bets, with losses reimbursed, maybe you will keep coming back.

My problem with this is that if you are not already doing sports betting, you might not be inclined to do more than just take the free marketing money. This could mean both companies will indefinitely produce losses, albeit at lower levels.

What to Do With DKNG Stock

Investors may just be taking tax-related losses at this point. That could account for the recent weakness in DKNG stock.

However, if not, they might also be concerned about the ongoing losses at both DraftKings and Golden Nugget Online Gaming. In addition, there might be a concern that ongoing dilution from the all-stock acquisition could be harmful.

After all, if DKNG stock keeps dropping, GNOG shareholders might want a better acquisition ratio, although this may be unlikely. Either way, as an all-stock deal, the acquisition along with its losses will be a dilutive drain on DraftKings. As a result, most cautious investors will want to wait until the tax-related selling abates and DraftKings closes the GNOG deal.

On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.