Fox Files Lawsuit For FanDuel Ownership Stake

In early April, Fox Corporation announced that it would file a lawsuit against Flutter Entertainment, FanDuel’s parent company, for an 18.6% ownership stake in the company. As of early April, the dispute includes discussion over how much Fox Corporation should pay for the ownership stake. The prosecution is arguing that it should pay as much as Flutter Entertainment paid in December 2020, while the defense is arguing it should pay relative to market value in July 2021.

A laptop open to a window of a graph depicting a stock value rising and falling.

The valuation of FanDuel stocks plays a central role in a lawsuit filed by Fox against Flutter Entertainment. ©StockSnap/Pixabay

The December Majority Acquisition Raises Questions

In December 2020, Flutter Entertainment announced that it would purchase a majority stake in FanDuel. The deal closed for $4.18 billion, garnering Flutter Entertainment 95% ownership of one of the US’s most prominent sports betting companies. 37.2% of that total came from Fastball, which Flutter paid for in cash and shares.

At The Time, Door Left Open For Fox

When Flutter Entertainment closed the December deal, the company specified that the option remained open for Fox Corporation to buy 18.5% of Flutter’s stock in FanDuel in July 2021. Additionally, Fastball would maintain 7% control of FanDuel. The remaining 5% of FanDuel stock remains controlled by Boyd Interactive Gaming.

This was due, in part, to some complicated business dealings taking place between a constellation of entertainment and media companies, including The Stars Group, Fox, and Flutter Entertainment. In exchange for the 18.5% of FanDuel, Fox Corporation ceded its gambling option, Fox Bet, to Flutter in its entirety, with the option to buy back 50%.

In April, Controversy Over Cost For Purchase

Four months later, Fox Corporation announced that it would be filing a lawsuit against Flutter Entertainment regarding the cost of this 18.5% share in FanDuel. Indirectly, this lawsuit indicates that Fox Corporation has decided, during these intervening months, to purchase that share of FanDuel, speaking to the company’s success.

Fox Pushes For Consistency

According to coverage of the lawsuit, Fox Corporation aims to purchase FanDuel for a price equivalent to what Flutter Entertainment paid for the stock in December 2020. Fox Corporation has been given any access to the shares in the first place because it helped Flutter secure liquidity to make the December purchase.

Flutter Argues Updated Price Should Be Paid

In response, Flutter Entertainment is now saying that it will only sell these shares to the company if Fox Corporation agrees to a price equivalent to the share value of each stock in July 2021. This assumption also implies that the July 2021 stock will be more expensive than it was in December 2020, indicating that FanDuel is doing well.

Put Your Money Where Your Mouth Is: The Facts And Figures

To be specific, Flutter Entertainment’s 95% stake of FanDuel was given a valuation of $11.2 billion in December 2020. Following the company’s stated stellar performance in 2020, this valuation has soared. According to one report, FanDuel could be worth as much as $30 billion after going public.

Cause For The Court Case: FanDuel Performance Soars

In early March, Flutter Entertainment reported an increase of 106% in 2020 earnings for FanDuel, a trend seen across the American sports betting industry — one of the better fiscal outcomes of the 2020 pandemic. In a statement, Flutter reported that FanDuel attracted more US customers in the week prior to the Super Bowl than in all of 2019.

Sports Betting Company Valuations Spike Post-COVID

According to a report from Financial Times, this conflict comes out of a general trend across the US of sports betting companies coming into significant new revenue streams. The report attributed this shift to increasing sports betting, linked to a wave of states legalizing sports betting and online gambling since lockdowns began.

Could An IPO Be On The Horizon?

According to one source, Flutter Entertainment and Fox Corporation could determine the value of FanDuel shares by pursuing an IPO (initial public offering) for the company. This would mean, effectively, that FanDuel would go live on the stock market, allowing for laypeople to invest in the sports betting company.

FanDuel Competitor theScore Secured IPO

FanDuel would not be the first North American sports betting company to pursue going public on the stock market. In late February, the company announced that it would be launching an IPO on the US stock market. At that point, it was already live on the Toronto Stock Exchange.

Shortly after launching, theScore’s US IPO proved to be a smashing success, outperforming the company’s expectations. According to an early March report, the company had estimated it would earn $162 million from its stock market launch and sell six million shares. Instead, it raised $186.3 million, selling 900,000 more shares than expected.

DraftKings Boasts Massive Success

Similarly, DraftKings — perhaps FanDuel’s premiere competitor — went public in April 2020. Since then, shares in the company have more than tripled in value. The same trend has been seen in Penn National Gaming following its partnership with sports media company Barstool Sports to create a new integrated sports betting and media app.

Have you enjoyed this article? Then share it with your friends.
Share on Pinterest
A graphic of a female judge standing before weighted scales.

Similar Posts