Despite having the largest North American market share and greatest profitability of any sports-betting provider, FanDuel isn’t publicly traded. Nor does that appear likely to change, according to a new Jefferies Equity Research note. Instead, British-based analyst James Wheatcroft reports that an initial public offering (IPO) of parent Flutter Entertainment on a U.S. stock exchange is being “considered.” Flutter shares are currently traded on the London Stock Exchange.
Noting that the preponderance of Dublin, Ireland-based Flutter’s profitability was shifting to American shores and that the United States market could be three times larger than the rest of the world by 2030, “The discussion around a U.S. listing makes sense,” Wheatcroft wrote. He added, “A full U.S. listing may result in significant shareholder churn, as some will not hold U.S.-listed shares.” He also cautioned that obtaining 75 percent shareholder approval for an IPO would present “a high hurdle.”
Given Flutter’s international position, Wheatcroft expects it to trade for a premium on stock exchanges. Recent arbitration valued Flutter at $22 billion, including a $2 billion carrying-value adjustment. According to Wheatcroft, the implication is that Flutter’s non-U.S. assets are priced at only six times cash flow compared to a historical average of 15 times. He applied a 10-times-cash-flow valuation and arrived at a prospective stock price of £165 per share or $201.
While Wheatcroft expects the Flutter board to “consult extensively with shareholders” before formally proposing an IPO, he says it has “reached the preliminary view that an additional secondary U.S. list of … ordinary shares will yield a number of long-term strategic and capital-market benefits.” He enumerated these as a higher profile for Flutter stateside, superior recruitment and retention of American-based talent, improved access to capital markets and new investors, and better overall liquidity for the parent company’s shares, as well as the option of pursuing a U.S. bourse listing.
If the board’s soundings find support for an IPO, Wheatcroft expects it to be raised at the April 27 shareholder meeting. If the resolution passes, he believes that a six-month regulatory procedure would follow, meaning no listing of Flutter shares on exchanges until late in the year.
“Consultations with shareholders are expected to start immediately,” he added. “In the event that there is broad shareholder support, an additional U.S. listing would take precedence over any plans to list a small shareholding in FanDuel.”
