Earlier this month, Flutter Entertainment stated that it was considering a possible IPO for the popular US sportsbook and daily fantasy sports site FanDuel. The exact wording in the statement mentioned “a small shareholding in FanDuel in the US.”
The international gaming company was also quick to mention that “no decision has been made at this time.” Flutter was commenting on an earlier news report that the company was under pressure from its stockholders to make such a move.
Based in Dublin, this bookmaking holding company was created through a previous merger between Paddy Power and Betfair in 2016. The new company, Flutter Entertainment, made its first major acquisition in 2018 with the purchase of FanDuel.
The following year, The Stars Group was added to the fold as a major Canadian-based gaming operator. Flutter’s US division consists of FanDuel, Fox Bet, and the TVG Network. It continues to operate more than 600 retail betting shops in Ireland and the UK.
FanDuel gas grown to become the most valuable prize among the group behind the tremendous growth of legal sports betting in the US.
While pressure mounts among investors to capitalize on the situation by turning FanDuel into a separately traded company on a US exchange, Flutter has other incentives to keep it part of its portfolio.
Also factoring in this decision is Fox Sports option to buy an additional 18.5% stake in FanDuel this July. Fox currently owns 2.5% of Flutter. Also included in the current arrangement with FOX is a 10-year option to buy half of The Stars Group US division which currently owns Fox Bet.
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This presents some complications that would need to be settled before Flutter could proceed with any type of FanDuel spin out.
The root of the issue with Flutter investors is the company trading at a discount to DraftKings as the other major player in the US sports betting and daily fantasy sports industries. Another area they have to expand is in betting exchanges with the likes of Matchbook.
Speculation of a FanDuel IPO also spiked when Flutter decided to acquire an additional 37.2% stake in the company in December of last year for $4.5 billion. This transaction set up the perfect scenario for a spin out down the road with Flutter now owning 95% of FanDuel.
Breaking down the financial numbers, FanDuel has a market capitalization of $39 billion verse DraftKings’ $28 billion figure. It reported an income of $967 million in 2020 against DraftKings’ revenue figure of $644 million.
As compared to all of Flutter’s other gaming brands, investors believe that FanDuel’s value may be negatively impacted as part of this group. Its upside potential is far greater than these other assets.
The company had previously released the following statement:
(Flutter) regularly evaluates its organizational and capital structure to access how best to position itself to deliver upon the group’s strategy. Should a decision be made to proceed with a listing in due course, an announcement will be made as appropriate.
Another positive aspect of a FanDuel spin out would be the cash to help pay down Flutter’s current $4 billion debt from previous acquisitions as a means to enhance its stock’s value.
