Flutter stock rose 6.5% on news that the company may sell off part of its stake in FanDuel by way of an IPO

Flutter Confirms Rumors That It Is Considering A FanDuel Spinoff And IPO

One thing’s become very apparent in the last two years: Americans love sports betting. As wagering sets one record after another, legal sportsbooks like DraftKings and FanDuel are reaping the rewards. That growth may be touching off a FanDuel IPO.

Today, FanDuel‘s primary owner, Flutter Entertainment, confirmed rumors it has been considering a public offering. It was just four months ago, in December, that Flutter acquired the final 37% of the company for $4.2 billion.

The Dublin-based organization’s statement about press speculation acknowledged the possibility spinning off its biggest US brand, valued at $11 billion. Flutter is mulling “listing in the US of a small shareholding in FanDuel.”

Flutter’s stock was up 6.5 percent by the closing of European markets on Monday.

Why a FanDuel IPO matters to investors

Flutter is already an online gambling behemoth, and spinning off FanDuel will give it further ammunition for its fight for dominance in the US sports betting market.

Major US markets are keen on sports betting and online gambling in general. As of Mar. 12, Penn National Gaming and Caesars Entertainment joined the S&P 500.

MarketWatch noted:

“Penn has seen its stock rise nearly 750% in the past year amid further legalization of sports betting and its investment in popular sports website Barstool. Penn is using Barstool’s branding on its sports-gambling platform, which competes with [Flutter, DraftKings, William Hill,] Caesars and others.”

How gamblers are reacting to increased online sports betting

Americans made history in January. That was the first month US online gambling, including sports betting, generated more than 17% of all commercial gaming revenue. That total included $4.4 billion bet on legal sportsbooks, according to the American Gaming Association.

The states fueling that record handle include:

  • Colorado
  • Indiana
  • Iowa
  • Michigan
  • Mississippi
  • New Hampshire
  • Oregon
  • Pennsylvania
  • Rhode Island
  • Tennessee
  • West Virginia

Flutter’s move to spin off FanDuel caps years of activity

Though Flutter’s activities span all gambling verticals, sports betting has always been its focus. Until its acquisition of FanDuel in 2017, it operated mainly in the Irish and UK markets.

Last year, Flutter acquired additional sportsbook brands in the form of Fox Bet and Sky Betting and Gaming, as part of its $12 billion merger with The Stars Group. Like FanDuel, Fox Bet is a purely US-facing brand, while Sky serves UK customers.

The Stars Group is of course best known for PokerStars, the world’s biggest online poker site. Flutter has indicated that it plans on increasing investment in that brand. Meanwhile, Fox Bet has tremendous potential but trails far behind FanDuel at the moment. One possible motivation for spinning off FanDuel is to raise capital to attempt to build up these other brands in the US market.

Sell while the market’s hot

Of course, it may also simply be the case that Flutter sees a limited time opportunity here. FanDuel’s corporate history closely matches that of its longtime rival in the daily fantasy sports space, DraftKings.

The latter’s stock has increased sixfold in value over the past year. It hit an all-time high of $74.09 on Friday, though it has subsequently come back down on the news that the company is looking to raise an additional $1 billion in liquid capital.

It’s a matter of debate whether or not DraftKings is overvalued at the moment. If Flutter believes it is, however, it may feel it can likewise fetch a high price for FanDuel, once separated from its other brands. In that case, there is no shortage of other places it could reinvest the funds.

- Heather Fletcher is the lead writer with OnlinePokerReport. She's a career journalist, with bylines in The New York Times, Adweek and other publications. Reach her at [email protected]
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