US sports betting expansion – Flutter’s strategic move with controversial undertones
Flutter Entertainment, the parent company of FanDuel, will make its debut on the New York Stock Exchange (NYSE). This marks a significant milestone in its expansion strategy.
This move comes as the company seeks to capitalize on the expansion of the online sports betting market in the United States.
Trading stocks forecast: impact of Flutter’s NYSE dual listing
Flutter’s dual listing on the New York Stock Exchange under the ticker FLUT today marks a significant move in its US expansion strategy, competing directly with industry giants like DraftKings, ESPN Bet, MGM Resorts International, and Caesars Entertainment. Flutter’s Chief Executive, Peter Jackson, expressed excitement about the listing, expecting it to enhance access to capital markets and make the company more appealing to US investors.
While DraftKings may initially appear vulnerable to Flutter’s listing, analysts, including Jordan Bender from Citizens JMP Securities and Stifel analyst Jeffrey Stantial, believe the risk of investors shifting from DraftKings to Flutter solely based on the listing is minimal. Bender emphasized the efficiency of markets and valuation-driven trading, while Stantial noted that investors might opt for Flutter if they seek exposure to a more international business, given DraftKings’ US-centric focus.
Despite DraftKings’ recent success, with a 157 percent gain in the last 12 months and a reported increase in monthly unique players, Flutter’s listing is not seen as an imminent threat. Investors anticipate details on a potential marketing deal with Barstool Sports and the company’s response to Flutter’s listing when DraftKings reports its fourth-quarter financial results on February 15. Overall, the consensus is that Flutter’s listing does not necessarily translate to a loss for DraftKings in the ongoing competition for market share.
US sports betting boom and regulatory challenges
In 2018, the US Supreme Court overturned a longstanding law prohibiting sports betting in most parts of the country. This decision opened up a new market for companies like Flutter, which saw its US sales skyrocket from ￡191 million ($243 million) in 2018 to ￡3.6 billion ($4.59 billion) last year. FanDuel, along with competitors DraftKings and BetMGM, has been at the forefront of this emerging market.
Previously listed on the London Stock Exchange and headquartered in Dublin, Flutter has decided to drop its secondary listing in Dublin in favour of the NYSE. This strategic move aims to enhance its visibility and access to capital in the US market.
Ahead of the switch, Flutter outlined its optimistic outlook for future growth in a regulatory filing. However, it also acknowledged potential challenges, particularly around problem gambling. The company recognized that such issues could significantly influence future industry regulation, trigger investigations, and deter potential bettors.
Established States in 2024
The liberalization of sports betting in the US has had a transformative impact on Flutter. So much so that its CEO, Peter Jackson, has considered designating May 18, the day of the Supreme Court decision, as a company holiday. Shortly after the 2018 ruling, Flutter acquired a controlling stake in FanDuel.
Five years ago, the US market accounted for about 10 percent of the group’s business (then known as Paddy Power Betfair). By last year, this figure had risen to almost 40 percent. While sports betting is now legal in 36 states and Washington DC, several major states, including Texas, have yet to legalize it. However, Flutter remains confident that they will follow suit.
Arizona
Arkansas
Colorado
Connecticut
Delaware
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
Montana
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Ohio
Oregon
Pennsylvania
Rhode Island
South Dakota
Tennessee
Virginia
Washington DC
Washington
West Virginia
Wisconsin
Wyoming
Source: SiGMA
Noteworthy key details:
North Carolina has limited sports betting available through tribal casinos.
In New Mexico and Wisconsin, certain tribes offer sports betting under existing Class III gaming compacts.
Mississippi permits app-based sports betting but restricts it to on-site operations at licensed casinos.
The journey toward legal sports betting in Florida is currently entangled in a legal dispute spanning state and federal courts.
Potential for a massive market
Wall Street shares this optimism. Joe Stauff, an analyst at Susquehanna, a trading firm, described online gambling as a “hyper-growth industry” in the US and highlighted FanDuel’s significant competitive advantage. Mike Hickey of Benchmark, an investment bank, echoed this sentiment, stating, “It’s just getting started … It’s going to be a massive market in the US.”
Despite the industry’s claims of being highly regulated, Flutter noted in the filing that “social responsibility concerns” could significantly influence the regulation of online betting and iGaming.
These concerns could impact responsible gaming requirements, result in investigations and litigation, and may adversely affect the company’s reputation.
While Flutter’s NYSE listing marks a significant step in its US expansion strategy, it has not been without its share of controversy. The decision to delist from the Dublin Stock Exchange has raised eyebrows in some quarters. This move, while strategic from a business perspective, signifies a shift in the company’s focus towards the lucrative US market, leaving its Irish roots behind. As Flutter continues to navigate the rapidly evolving landscape of online sports betting, it will be interesting to see how this decision plays out in the long run.
