Here’s a conclusion that could startle followers of gambling-related companies: FanDuel alone could be worth $40 billion should it go public. As it stands, the worth of its parent Flutter Entertainment is $40 billion.
This speaks well of the plan to go the IPO route with FanDuel. Flutter owns 95 percent of the sportsbook. When Flutter revealed the possibility of an IPO, its stock jumped 7 percent, according to Legal Sports Report.
Analysts are near unanimous that FanDuel is undervalued compared to its chief competitor, DraftKings, which trades at 27 times FY21 sales for a $28.5 billion valuation. Yet FanDuel Group expects 30 percent more revenue in FY2021.
Analysts say the undervaluation speaks to Flutter’s listing on a U.K. exchange and not in the U.S. As Bank of America put it in a note to clients on Monday:
“We believe that even a small shareholding list of the FanDuel business in the U.S. could help crystallize the value of the business, boosting Flutter’s overall valuation,” Bank of America told clients.
Peel Hunt analyst Ivor Jones wrote that Fox has the option to buy 18.6 percent of FanDuel from Flutter in July based on fair market value. If the valuation increases through an IPO, Flutter stands to make a lot more from the transaction.
But Numis Securities analyst Richard Stuber wonders whether the stock values are accurate.
“We can certainly see the appeal of a U.S. IPO in the short term, but our key concern is that DraftKings may be overvalued and therefore Flutter would arguably be chasing a short-term bubble,” Stuber said.
Still, neither company is close to turning a positive cash flow, even in the face of competition from more than 10 companies.
Yet Paul Martino, founder of Bullpen Capital, said that the bubble was market-wide rather than just confined to sports betting which works in favor of Flutter making a move.
“The bubble is going to pop regardless of what Flutter does,” Martino said.
