“Whiplash” is one way to define recent market fluctuations. It’s also how investors hoping to buy shares in FanDuel may feel.
Those investors have been waiting since March 2021 for FanDuel to navigate all the obstacles to its planned US IPO. The last of those challenges seemed to have been a dispute between FanDuel’s primary owner, Dublin-based Flutter Entertainment, and its media partner, Fox. The companies may be getting close to settling that issue, yet the inhospitable economic climate may delay things further.
CNBC reported that Nasdaq stocks had hit a two-year low on Oct. 10, then “rose sharply” the following day. That kind of volatility has analysts advising online gambling operators and supplier clients against pursuing public offerings right now. That was one recommendation coming out of the Analyze This session on Sept. 22 at the East Coast Gaming Congress and NexGen Gaming Forum (ECGC).
In any case, investors have begun cooling on US online gambling mergers and acquisitions after the frenzy of previous years.
Still, Flutter stock (PDYPY) rose more than 10% from Thursday to yesterday. That’s on the heels of Thursday’s news that a New York court dismissed a lawsuit brought by FanDuel creator and co-founder Nigel Eccles. He’d sued because he wanted more money than he received in 2018 for selling the company.
The Last Block to a US FanDuel IPO
In March 2021, Flutter confirmed it was considering a public offering of its US market-leading online gambling brand, FanDuel Casino & Sportsbook.
A month later, Flutter media partner Fox issued a press release:
Fox Corporation has filed suit against Flutter to enforce its rights to acquire an 18.6% ownership interest in FanDuel Group — an American sports betting brand — for the same price that Flutter paid for that interest in December 2020.
Yesterday, a Flutter representative said those behind-closed-doors negotiations with Fox actually began in June 2021 in JAMS, formerly known as Judicial Arbitration and Mediation Services.
Rob Allen, Group Head of Corporate Campaigns, Flutter, told Bonus:
As previously disclosed, the Group is in a legal arbitration process with FOX Corporation with respect to its option to acquire an 18.6% stake in FanDuel and related issues.
The arbitration hearing commenced in June and, should the parties not reach a negotiated agreement in the interim, we still expect a binding decision from the arbitrator this month.
A Fox representative didn’t immediately respond to Bonus.com‘s request for comment. However, Fox representatives are rather busy at the moment. The company announced on Friday that it was considering merging with News Corporation.
What a US FanDuel IPO May Look Like
A US FanDuel IPO is probably going to resemble a beta test.
Once the market is less volatile, Flutter may renew its plans for a “listing in the US of a small shareholding in FanDuel,” as the company put it in March 2021.
The purpose of starting small is Flutter likely wants to test FanDuel’s valuation in the US stock market. While it may sound odd to say FanDuel needs more exposure to US investors, its value is shielded by Flutter’s stock price. Also, a beta test of FanDuel stock will give Flutter a chance to reward and incentivize employees with early shares.
However, none of that will happen any time soon, and it’s unclear exactly how small a percentage of shares the company plans to offer. It won’t, at any rate, include the 18.6% Fox has earmarked.
BetMGM May Jump Ahead
While Flutter pauses on a possible US FanDuel IPO, the US online casino market leader may jump in the void.
The leader at Entain, half of the ownership team for BetMGM, announced on Thursday that a US BetMGM IPO might happen.
Entain CEO Jette Nygaard-Andersen said during the Q3 2022 trading update that the app her Isle of Man company runs jointly with Las Vegas-based MGM Resorts International is performing well. That joint ownership has proven thorny for both companies, and taking BetMGM public would be one way to resolve that tension.
BetMGM expects to become profitable by late 2023.
And then when we reach that point, that could open up further opportunities for us. So whether it’s through dividend[s], or … we – at some point – could look at an IPO.
Why Flutter Didn’t Offer a US FanDuel IPO Sooner
In addition to the Fox disagreement and the Eccles lawsuit, tumult greeted Flutter when it considered offering a US FanDuel IPO.
Matt King left FanDuel in July 2021, sending Flutter into a CEO-seeking tizzy.
Amy Howe, the former COO of Ticketmaster, moved up from within FanDuel to become the temporary CEO. In October 2021, she earned the permanent position.
Then in September 2021, Flutter settled an 11-year-old lawsuit with the Commonwealth of Kentucky for $300 million. Before the settlement, Flutter was readying to fight a $1.3 billion judgment from the Kentucky Supreme Court against its PokerStars brand. The fight was slated to take place in front of the US Supreme Court.
All of that is enough to cause anyone whiplash.