How A FanDuel IPO Could Be Impacted By Fox, Flutter Entertainment Valuation War

A FanDuel initial public offering in the U.S. could be delayed by a legal battle between two owners of the sports betting company.

What Happened: A lawsuit has been filed by Fox Corporation FOX FOXA against Flutter Entertainment PDYPY. 

“Fox Corporation has filed suit against Flutter to enforce its rights to acquire an 18.6% ownership interest in FanDuel Group, an American sports betting brand, for the same price that Flutter paid for that interest in December 2020,” Fox said in a Tuesday statement.

Related Link: Sports Betting ETF Co-Founder Talks SPACs, Undervalued Foreign Exchange Plays 

Why It’s Important: As part of its acquisition of The Stars Group, Flutter Entertainment and Fox reached a deal over the Fox Bet joint venture between TSG and Fox.

Fox gave up ownership of Fox Bet to Flutter and received options to acquire 50% of Fox Bet as well as 18.5% of FanDuel.

Flutter Entertainment upped its stake in FanDuel from 57.8% to 95% in December. The company acquired a stake from Fastball Holdings for $4.2 billion.

Fox's lawsuit calls for the media company to buy the stake in FanDuel based on the $11.2-billion valuation set in December. FanDuel could be valued at $30 billion on the open market, according to LegalSportsReport.

Fox could also have leverage in a legal battle, with sources telling LegalSportsReport that Fox can keep The Stars Group assets like FoxBet and Poker Stars in a potential FanDuel IPO.  

Flutter Entertainment is exploring an IPO for Fanduel, which would bring a pure play sports betting company public that could compete with DraftKings Inc DKNG given its strong brand name, dominant market share and large customer pool.

“What is a surprise, and a positive one at that, is the valuation. The implied FanDuel valuation of $11.2 billion is a significant discount to DraftKings,” Roundhill Investments CEO Will Hershey told Benzinga in December. Roundhill runs the Roundhill Sports Betting & iGaming ETF BETZ.

Flutter initially invested in FanDuel in 2018 at a valuation of $1 billion, according to Hershey.

“From a strategic perspective, it’s now increasingly possible that Flutter may look to spin-off all or part of its stake in FanDuel onto a U.S. exchange, unlocking shareholder value.”

Boyd Gaming BYD owns a 5% stake in FanDuel.

FOXA, PDYPY Price Action: Class A Fox shares were up 0.43% at $37.21 at last check Wednesday. Flutter shares were down 1.19% at $106.71.