Flutter bets on New York Stock Exchange in a game changing move

Flutter Entertainment’s decision to relocate its primary listing from London to New York has been backed by an overwhelming 98 percent of shareholders at its annual meeting. The move to the New York Stock Exchange is expected to be effective by the end of this month and it reflects the company’s growth trajectory and the changing dynamics of the global financial markets. It remains to be seen how this move will impact Flutter’s future growth and the London Stock Exchange’s standing as an international financial centre.

The decision by Flutter, formerly known as Paddy Power Betfair, is not an isolated incident. It is part of a growing trend of public companies moving their primary listings from London, thereby weakening the London’s standing. This trend has been fuelled by the allure of higher valuations and executive pay in the US market. One thing is certain, however – the global financial landscape is in flux, and companies are strategically positioning themselves to navigate this changing terrain.

Implications for investors

 “As Flutter moves to enhance its investor profile in US capital markets, the NYSE listing might increase Flutter’s influence on investor perceptions of UK gambling PLCs.”

Russell Pointon, Equity Analyst – Edison Group

Flutter’s transatlantic leap has several implications for its investors. New York will enhance Flutter’s profile in the US, its largest market by revenue. This increased visibility will attract a large pool of investors and subsequently increase the company’s market cap. US markets are recognised for their depth and liquidity therefore Flutter will gain access to deeper capital markets which will provide greater liquidity for its shares.

Flutter’s New York listing may lead to an increase in Flutter’s share price benefitting its investors. The move to a primary US listing will give Flutter the opportunity to pursue inclusion in major US indices and this will increase the company’s visibility resulting in a demand for its shares.

Growing trend to shift to NYSE

Flutter’s primary listing relocation to NYSE is not an isolated incident. Several other companies have also chosen to make a similar transition. Earlier this year, Anglo-German travel company Tui and building materials company CRH made similar moves. Indivior, a pharmaceutical company, and Ocado, an online grocery retailer, are also reportedly considering a shift to the US. This exodus from the London Stock Exchange is indicative of a broader shift in the global financial landscape.

The decision by Flutter comes at a time when the company is anticipating to generate more than 40 percent of its revenues from the US market this year. This growth has been largely driven by the success of FanDuel, one of the country’s biggest online betting and fantasy sports platforms. The popularity of FanDuel has surged following the relaxation of online betting restrictions in the US in recent years. Sales in the country have risen from 10 percent of revenues five years ago, to 40 percent last year, making it the largest market by revenue for Flutter.

And the risks

On the flip side, Flutter’s move obviously means that it will be removed from London’s FTSE indices. This may lead to selling pressure from index funds and other institutional investors that tract these indices.

It is also widely recognized that the recruitment and retention of talent in the United States typically necessitates a more substantial investment. As a result of Flutter Entertainment’s move, the company will be better positioned to recruit and retain US talent however this will increase staff costs and hiring expenses. Despite these potential higher costs, the ability to attract and retain talent in the US could significantly contribute to the company’s long-term growth and success.

The move to the US was first mooted in February 2023 when Flutter consulted shareholders over plans to gain a secondary listing in New York as part of its wider growth plans in the country. The company referred to the New York Stock Exchange as its “natural home” prior to the US listing in January.

The implications of this move are significant. It not only reflects the changing dynamics of the global financial markets but also underscores the strategic importance of the US market for companies like Flutter. As more companies follow suit, the shift could potentially reshape the global financial landscape, with New York emerging as the preferred destination for primary listings.

What the analysts are saying

The?market reception?to this decision has been overwhelmingly positive, with 98 percent of shareholders backing the move. The company expects the primary listing to become effective imminently. As one analyst put it, “The strong shareholder support underscores the confidence in Flutter’s strategic direction.”

The move aligns with a broader trend of companies favouring U.S. markets, driven by potential valuation advantages. This strategic alignment reflects concerns about London’s attractiveness for IPOs and listed firms in the post-Brexit landscape. An industry observer noted, “Flutter’s move is emblematic of the shifting global financial landscape, with the U.S. increasingly seen as a more attractive market.”

Russell Pointon, Head of Consumer and Media markets at investment research firm Edison Group, highlighted the potential for increased influence. He noted that the NYSE listing might increase Flutter’s influence on investor perceptions of UK gambling PLCs.

However, the move is not without potential risks. Some analysts have expressed concerns about the move. For instance, an article in The Guardian suggested that UK shareholders should vote against Flutter’s flight to the US. This highlights the need for Flutter to carefully manage its stakeholder communications during this transition.

Flutter’s CEO, Peter Jackson, has stated that the group’s focus remains on the US, with liquidity pools there described as “much greater” than in any other markets. He also mentioned that the company sees itself as going home – the US is their natural home. This statement underscores the strategic importance of the U.S. market for Flutter’s future growth.

While there is a general consensus on the strategic benefits of the move, some analysts have also highlighted potential risks. As one financial commentator aptly put it, “Flutter’s move is a bold strategic play, but like all plays, it carries both potential rewards and risks.” It’s clear that this decision has sparked a significant discussion in the financial community.