Flutter Mulling IPO for “Small Shareholding” of FanDuel

Responding to reports in various media outlets, Flutter Entertainment told investors it is weighing the option of listing part of its online betting company, FanDuel, on a US stock exchange.

FanDuel has been under continuous pressure from investors to create a spinoff of FanDuel as a separately traded business since it increased its ownership of the online betting company to 95% last year.

Analysts say that such a FanDuel IPO would be a “major catalyst” for Dublin-based Flutter’s share price.

Flutter is Thinking About A FanDuel IPO

Bloomberg reports that in a statement issued by Flutter on March 15^th, the company said that it was considering spinning out the company.  However, it stressed that a FanDuel IPO was just one of several options available, and no firm decision has yet been made.

“Flutter regularly evaluates its organisational and capital structure to assess how best to position itself to deliver upon the group’s strategy,” announced Flutter.

“Options including the listing in the US of a small shareholding in FanDuel are being considered but no decision has been made at this time.

“Should a decision be made to proceed with a listing in due course, an announcement will be made as appropriate.”

$4.18B Deal to Purchase FanDuel

In December 2020, Flutter Entertainment agreed to purchase another 37.2% stake in FanDuel from Fastball, a consortium of investors headed by venture capital group KKR, for a price of $4.18 billion, increasing its ownership to 95%.  In 2018, Flutter acquired a 58% stake in FanDuel as it took a significant leap into the post-PASPA US sports betting market. That made an IPO a hot topic of discussion.

Flutter paid Fastball just over $2 billion in cash for its entire stake in the business, while the remainder of the deal was paid through 11.7 million Flutter shares.

The high price paid for FanDuel had investors jittery. Part of the logic for allowing Flutter to invest so heavily was that it would eventually lead to a spinoff.  Investors also expressed frustration that despite FanDuel’s status as the United States market leader, it was trading below its rival, DraftKings.

Morgan Stanley analysts said last month that Flutter was effectively trading at a 33% discount to its rival. They wrote that Flutter shares deserved a closer look because the company looked inexpensive relative to DraftKings.

According to CNBC, DraftKings’ market capitalization is more than $28 billion, and it predicts that it will have $1 billion in revenue this year. 

Flutter’s Investment in US Market Paying Off

At the beginning of the month, we reported that Flutter’s investment in the US market has more than paid off after the group reported that it had more than doubled its revenue in 2020.

For the full year, Flutter’s total revenues increased 28% to $7.2 billion.

Flutter’s chief executive, Peter Jackson, said that nowhere has the company’s growth been more evident than in the US, where it has consolidated its number one position in this crucial market. He pointed out that Flutter was the first US online operator to finish over $1.1 billion in gross gaming revenue.

According to analysts at Jefferies investment group, an IPO for FanDuel could serve as a “major catalyst” for Flutter’s share price, with estimates indicating an IPO for FanDuel could push Flutter’s shares up by 35%.