Flutter considers partial float of US betting arm

Flutter, the gambling company behind PaddyPower and PokerStars, is considering listing part of its US betting arm FanDuel to take advantage of investor demand for stocks in the fast-growing American gambling market.

The betting group said in a statement on Monday that it “regularly evaluates its organisational and capital structure” and that “options including the listing in the US of a small shareholding in FanDuel are being considered”. No decision has yet been made, it added.

FanDuel, which started out as a daily fantasy sports company in 2009, was bought by Flutter in 2018 and has emerged as one of the leading operators in the US sports betting and online gaming sector. Sports betting has only been permitted in states outside Nevada since a Supreme Court ruling in 2018.

Peter Jackson, Flutter chief executive, told the Financial Times this month that FanDuel was “unequivocally number one” in the US and had revenues greater than those of its two nearest rivals — fellow daily fantasy sports business DraftKings and the casino operator Penn National — combined.

Estimates for the size of the US market vary but Flutter said that it expects the total market for its US brands to exceed $20bn by 2025, double its forecast this time last year.

The valuations of DraftKings and Penn National have both increased as a result of this year’s frenzy for US consumer stocks and the rapid growth of sports betting as states move more quickly than expected to legalise gambling in order to benefit from the tax revenues.

Sources close to Flutter have said that both management and current shareholders are frustrated that the market undervalues FanDuel compared with DraftKings despite its higher turnover.

The US-focused DraftKings has a market capitalisation of $28bn compared with a £29bn market valuation for the much larger Flutter, which faces regulatory headwinds in some of its more mature markets such as the UK.

FanDuel generated about $900m of revenue in 2020, according to analysts at the investment bank Davy, while DraftKings made revenues of $643m. Both businesses are lossmaking as they invest in expanding in the US.

In December, Flutter increased its majority stake in FanDuel to 95 per cent in a $4.2bn deal as it looked to clean up its ownership structure.

The listing of a stake in FanDuel could be complicated, however, by the media group Fox Sports, which has a 2.5 per cent stake in the business with an option to increase that to 21 per cent in July.

Ivor Jones, an analyst at Peel Hunt, said that a public offering could provide “an important valuation reference point” ahead of Fox Sports exercising its right.

The potential listing was first reported by CNBC. Flutter’s shares were up 7 per cent in London morning trading.