FanDuel owner Flutter considers spin-out IPO

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
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The FanDuel logo. Photo: AP

Gambling company Flutter Entertainment (FLTR.L) has confirmed it is considering spinning out part of FanDuel, its popular fantasy sports gaming platform.

Flutter said in a brief statement on Monday that it was considering listing "a small shareholding in FanDuel" in the US but stressed that "no decision has been made at this time." The statement came in response to a CNBC story on Friday that said the company was under pressure to spin out its stake in the gaming company.

Flutter owns 95% of FanDuel, which runs daily fantasy sports competitions through its app and allows people to bet on sports in regulated jurisdictions. FanDuel is the largest player in the US fantasy sports market but is valued at less than DraftKings (DKNG) due to its ownership within the wider Flutter group. FanDuel trades at an implied discount of 27%, according to Barclays Capital, but had revenues 1.4 times higher than DraftKings last year. This disparity has led to frustration among some investors, according to CNBC.

Flutter, which also owns brands like Paddy Power and BetFair, said it "regularly evaluates its organisational and capital structure to assess 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," the company said.

Shares in Flutter surged almost 7% on the update.

Shares in Flutter spiked on the update. Photo: Yahoo Finance UK
Shares in Flutter spiked on the update. Photo: Yahoo Finance UK

Russ Mould, investment director at stock broker AJ Bell, said a spin out "makes perfect sense for two reasons."

“First, it is likely to get a much higher valuation than is currently attributed to the operation as part of the Flutter group," he said.

“Second, this is arguably the most exciting part of its group and it seems logical to want to capitalise on positive momentum and give investors an opportunity to invest purely in this bit. It also helps there is already a listed peer in the form of DraftKings."

Mould said a sale of part of the FanDuel stake would allow Flutter to pay down its £2.9bn ($4bn) debt.

Barclays Capital estimated a FanDuel IPO could deliver 19% upside for Flutter's share price, given the current implied discount of its stake.

"US sports betting and iGaming is the single biggest opportunity in the global online gambling market, a market which we believe could eventually be worth c$30bn per annum," said Greg Johnson, an analyst at stockbroker Shore Capital.

"A partial listing of US assets is a way of arbitraging the inherent value of such assets within broader gaming groups. The decision to be made is arguably of future funding requirements versus giving up a proportion of the upside."

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