FanDuel Spin-Off Could Be Affected by CEO Departure

It was recently announced that the CEO of FanDuel would be leaving and that he would stay with the company until a successor is found. The announcement came from FanDuel’s parent company Flutter Entertainment and along with it comes growing concerns. The most significant of which revolves around the Irish gaming company’s potential plans to list a portion of FanDuel shares on the stock exchange in the U.S. The plan that is still being considered, is that some of the shares will be available to public investors trading in the U.S. and to unlock more value for the FanDuel brand and Flutter Entertainment’s bottom line.

A Journey of Growth

The current CEO, Matt King, was appointed to his role four years ago. He joined the firm before legal sports betting started in the U.S. Once the Professional and Amateur Sports Protection Act (PAPSA) was overturned, King had his work cut out for him and he delivered. FanDuel was started as solely an online platform for daily fantasy sports which then evolved and subsequently became the largest and most successful online sports betting operator in the U.S. No further information was disclosed as to why King is leaving but as far as reports go, he will remain with the company as it searches for someone to replace him in his role as CEO.

In a statement from Flutter Entertainment, the company said that the board has been looking into the potential merits of listing a stake in FanDuel in the U.S. The statement went on to mention that the departure of King will affect any potential listing in the U.S. as well as its timing. However, the option is not being dismissed and will still be an option under review by the board, even as they search for a worthy candidate to take his place.

Shortly after FanDuel was established, Flutter Entertainment acquired its initial share of the sportsbook operator. From there it was upward for Flutter Entertainment as it now owns 95% of the sports betting company, after closing a deal with Fastball Holdings LLC. worth 4.175 billion USD in December 2020 . The remaining 5% of the company is owned by Boyd Gaming.

Bad Timing

In keeping up with news around Flutter Entertainment and FanDuel, King’s decision to depart at a time when the company is not only deciding whether or not to sell part of the business. Another major issue is the ongoing legal dispute with Fox Corporation in relation to the potential transaction. The lawsuit was filed against Flutter Entertainment with the Judicial Arbitration and Mediation service in New York in late March 2021. The lawsuit was based on an 18.6% interest in FanDuel that Fox Corporation has the rights to acquire, specifically about the pricing of the share. The price that Fox Corporation wants to pay should be similar to what Flutter Entertainment paid Fastball Holdings when the company acquired its 37.2% share of FanDuel. The broadcaster, Fox, would likely pay 2.08 billion USD for the share they have the rights to purchase. However, Flutter Entertainment wants to set the price at what it believes to be the fair market value and is likely much higher than the broadcaster is willing to pay.

The current discussion around listing FanDuel shares comes from urging investors looking to unlock value via the spin-off. The motive behind the idea is that the market capitalization would be worth more than its rival DraftKings. An idea that stems from the fact that FanDuel currently has a larger market share of the U.S. sports betting market than DraftKings. However, an 18.6% share of DraftKings is currently set at a value of 3.48 billion USD, which would still put FanDuel at a disadvantage if it decides to move forward with the spin-off.

Tensions Rising

The current CEO’s decision also comes at a time when tensions are running seemingly high between Flutter Entertainment and Fox Corporation. According to recent reports, Fox Corporation has threatened Flutter Entertainment and said that FanDuel marketing and advertising would be removed from its broadcasts if the company’s demands are not met. However, Peter Jackson, CEO of Flutter Entertainment responded to the threat by saying that Fox Corporation is not a major source of marketing spend for FanDuel. Reports from April also state that Jackson said that if a FanDuel spin-off becomes a reality then PokerStars and FOX Bet brands would not be included as he described the two businesses as entities that are currently struggling to keep up in the industry.